"Bernanke has zero credibility as far as I am concerned.
The Federal Reserve has zero credibility.
Go back at everything Bernanke has
said in the last seven or eight years since
he has been in Washington. He has never
been right about anything. The man has
zero credibility for anyone who would take
the time to look at his history. They have
been printing staggering amounts of money.
They have been taking staggering amounts of
debt onto their balance sheet, much of being
garbage. The federal government is spending
huge amounts of money they do not have. We
have inflation in the United States, and it
is going to get worse."
~ Jim Rogers

"To be sure, those promoting only more aggressive
fiscal and monetary stimulus ignore Credit
theory and financial history. There is absolutely
no discussion of Credit Bubbles or financial
Manias, as if there is no evidence either
has ever existed. [Nobel Prize winning economist]
Paul Krugman proposes only more egregious
deficits and central bank monetization without
factoring in myriad risks, including the
risks of Credit revulsion, currency collapse,
and global financial meltdown. Rather than
2008 developments alerting officials to systemic
Credit collapse vulnerability, the inflationists
have hung their (and everyone's) hats on the
specious 100-year flood premise."
~ Doug Noland (Prudent Bear)

"The situation is far worse than a struggle between
any two factions within the US. It is an anticipated
nationwide emergency event centered on the
nation's currency. What the Dept of Homeland
Security is expecting, and again, this is
according to my sources, what they are expecting
is the unsustainability of the American
Dollar. And we know for a fact that we
can no longer service our debt. There is going
to be a period of hyper-inflation. The dollar
will be worthless. The economic collapse will
be so severe, that people will not be ready." ~ Doug Hagmann (private investigator
with deep DHS source)

"The European [LTRO] debt structure will make it
more sustainable, but it is still unsustainable." ~ James Millstein (former Dept Treasury
official and Lazard restructuring chief)

"And so the check bounces, which is ironic, because
as we repeatedly explained, the Greek bailout
is not about Greece. It is merely to allow
Europe to bail out its banks via Euro Central
Bank and Troika funded interest payments,
using Greece as a passthru vehicle. Luckily,
that particularly aggravating farce may soon
be ending." ~ Tyler Duren (Zero Hedge)

"What may be lost in the noise that is the mainstream
press is the fact that Greece has not been
in a recession or even a depression. Greece
has been in a state of slow motion economic
collapse on the scale of past economic collapses
such as that of Argentina, but so far without
the ability to default [on their debt], devalue
[their currency], and inflate [their falling
assets]. [PIIGS nations] are only delaying
the inevitable by remaining in a currency
union with Germany, which ensures their economies
are also in a state of slow motion death spiral
of economic collapse. They are in fact making
the economic pain of their populations far
worse as a consequence of dragging out economic
collapse over many years rather than months,
as would have been the case had they had their
own currencies and money printing presses
such as that deployed by the UK. London
has successfully used smoke and mirrors inflation
to mask the truth that the nation is in a
far worse state in terms of indebtedness
than most of the EuroZone countries." ~ Nadeem Walayat (editor of Market
Oracle webjournal out of London)

"There is a very good chance Greece will exit the
Euro. It would have been desirable if the
European countries had kicked out Greece three
years ago. It would have saved a lot of agony.
As a result of the bailout, the problem has
become bigger and bigger and bigger. I think
it would be much better for Greece and the
entire Euro area if Greece were kicked out.
Spain kicked out. Italy out and even France
should be out. At the end you just have Germany
with the Euro currency. The other countries
can have their own currencies and still trade
and use the Euro as an international currency."
~ Marc Faber (who comprehends that all PIIGS
nations will be out soon)

"Greece's exit may become the envy of the EuroZone.
Default will be disastrous for Greece and
the resulting contagion would be damaging
for Europe. So goes the conventional wisdom.
The only debate has been about the strength
of contagion and the appropriate response
of vulnerable countries and of the cheque-writing
country. Might the debate be misguided because
the premise is flawed? Expelled from the EuroZone,
Greece might prove more dangerous
to the system than it ever was inside it,
by providing a model of successful recovery." ~ Arvind Subramanian (think in terms
of the Iceland model to force massive losses
to the banks, plow them under, nationalize
banking systems, and move forward without
the chokehold around the nation's neck)

"Spain is the big exposed toilet. France is the lever
for the plunge flush, just pulled. Italy is
the outhouse tipping over. The US & UK
are the sewage treatment plant overflowing.
Germany is the strained bidet (CLICK HERE),
surely overused. The USFed is the water utility
delivering toxic water from several outflow
pipes. GSax and JPMorgue are the turds circling
inside the toiley breaking apart. The green
tint in the water is from the USDollar toilet
paper squeezed off the rancid fecal matter.
The big event will occur when some big bank
has a sudden bout with diarrhea and breaks
the toilet altogether." ~ The Jackass (no insult intended
to legitimate honorable Turds like Ferguson)

"Anonymous is a Trojan Donkey coming out of the same
shop as Al Qaeda , Operation Gladio, and all
the other Disney-like illusions created by
the guys south of the Potomac river to deceive
the common sheeple. People are incredibly
gullible. Green Peace is a similar pool of
conjured fools. They tie up brain power and
people's energy in these organizations, so
they cannot become a danger to the Boyz elsewhere.
It is the battle proven Problem-Reaction-Solution
Matrix, all coming out of the same corner
office. Divide and conquer." ~ Source (with strong connections
to intelligence groups in England, Canada,
and Saudi Arabia)

For
a nice treat, enjoy a quick video tape of
the American classic, the Kentucky Derby horse
race, the first in the triple crown pursuit
(CLICK HERE).
Always a thrill. Then see a similar race result
in the second leg of the triple crown pursuit
(CLICK HERE).
A double thrill.

## MONETARY FRAGMENTS

◄$$$
THE NEXT MFGLOBAL VILLAIN SINKHOLE MIGHT BE
IDENTIFIED. NO SUCH FINANCIAL SERVICES FIRM
WILL WARN OF TROUBLE. THE PRECEDENT HAS BEEN
SET FOR HYPOTHECATION (THEFT) OF PRIVATE ACCOUNTS
DURING TIMES OF TROUBLE. INVESTORS SHOULD
TAKE PREVENTIVE ACTION WHEN THE SIGNS OF DISTRESS
ARE SEEN. PENSON SHOWS DISTRESS. $$$

The
Jackass openly stated in December that more
MFGlobal private account thefts should be
expected. The precedent has been set. No prosecution
of the theft by JPMorgan have occurred. The
official avoidance game is clear. The crime
scene shows the law subverted, since MFG was
a brokerage house, not a financial firm. With
MFGlobal the CME refused to honor its required
commitments to restore investor accounts.
The USDept of Justice have ignored the brokerage
house law procedures. Oversight failed and
customer funds disappeared. An impending market
dislocation event appears on the horizon,
the next target possibly identified. Credit
goes to the vigilant Ann Barnhardt, who has
fingered Penson Worldwide as the next potential
domino. The company is a provider of a
wide range of critical securities and futures
processing infrastructure with products and
services to the global financial industry.
Their stock price indicates deep distress.
The net capital for Penson has deteriorated
significantly in recent months. CME has given
the public every clue as to their response
to the next theft.

The
March data is not yet available, but the February
data shows the Penson net capital was down
nearly 30% over January. If Penson fails,
the rules should follow a safe course for
client funds. But these are not normal times.
The big financial firms are desperate to avoid
bankruptcy, and thus eager to snatch (aka
steal) client funds. It is entirely possible
that the proprietary trading of all brokerages
would unwind, yet client funds would vanish
as they did under the watchful eye of CME
and the eager hands of JPMorgan. In today's
marketplace, no such thing as a safe brokerage
exists when the USGovt provides regulatory
oversight in the midst of the pervasive vile
Fascist Business Model. A day might come when
many giant banks and brokerages have enough
proprietary exposure that a gaggle will all
fail, leaving client funds in a vanishing
act.

The
prudent investor should assume the worst,
since the officials have shown that the worst
in outcomes will find no remedy or conformity
to law. In m view, anyone playing with futures
contracts in the current environment is like
a nitwit marching in an open field with a
metal pole during a lightning storm. Individuals
with a 401k, an IRA, or a pension fund, whether
private or public, face great risk. The USGovt
will not protect you, and worse, might encourage
big financial firms to ensnare and defraud
you of the funds. The political leaders are
receiving vast money on a regular basis from
the financial sector. The conflict of interest
is a grand stench. The public must protect
themselves, and removing funds from the system
might be the best path. Investment in gold
and silver bars and coins, held outside the
criminal confines of the United States has
proved itself a wise course. See the Market
Ticker article (CLICK HERE).

◄$$$
THE GLOBAL MONETARY WAR IS IN ITS FOURTH YEAR.
IT HAS A SOFT NAME FOR OFFICIAL USE, THE GLOBAL
FINANCIAL CRISIS. NO RESOLUTION IS NEAR, AS
THE EVENTS OCCUR MORE QUICKLY, THE IMPACT
MORE SEVERE, THE DAMAGE TO THE SYSTEM IRREPARABLE.
THE WAR SEEKS A CLIMAX. THE FINAL CHAPTER
INVOLVES THE UNITED STATES LOSING ITS CREDIT
CARD, THE GLOBAL RESERVE LICENSE IN THE USDOLLAR.
THE THIRD WORLD AWAITS. $$$

George
Orwell has a wonderful grasp of official deception
and guile. The commonly reported confidence
problem is more like aversion to corruption,
theft, and fraud. The commonly reported liquidity
problem is more like debt collapse, wage destruction,
and profound loss from investments. In my
unique view, the financial world war began
in 2003 with export of toxic mortgage bonds.
The Enron event was the dead canary in the
mine shaft years ago, where investors were
fleeced, including a few known by the Jackass.
The Greenspan directives enabled the US
financial sector to engage in deep fraud without
oversight, even active encouragement.
The war escalated in 2008 with the Lehman
Bros kill job, a designed execution with motive
and full exploit by JPMorgan. Hidden was the
forced Fannie Mae nationalization, forced
by China, angry over the accumulation of US$-based
bonds under a 1999 Most Favored Nation accord
that the United States had violated. The crumbling
European sovereign bonds are the latest and
most visible deadly collapse event. The TARP
Fund smokescreen was used to shield $26 trillion
in special grants (loans at near 0% never
to be repaid), another big raid by the elite.
The TARP Fund flows have stopped, a probable
cause for added strain and stories of breakdown.

The
mortgage contract violations, replete with
robot signatory functions, was a fraud perpetrated
in full view. Its prosecution has been spotty,
with hundreds of forgiven home loans as punishment,
peanuts in the entire system. The European
breakdown has been a spectacle, drawn out
in slow motion with false fixes galore. The
MFGlobal client thefts were collateral damage,
snatched by JPMorgan in a desperate turn.
The Madoff Fund was pure plain fun, part of
a vast role program run by the USGovt and
Bank of England with full impunity and active
protection. The money still resides in Switzerland,
protected by very strange laws with religious
overtones. The Libyan gold liberation of 144
metric tons was a pillbox war raid, where
descriptions of the active soldiers being
NATO served as distraction to the truth. The
Iran sanctions are a recent standoff turned
into coordinated retaliation against the USDollar
forces, which has worked to accelerate the
gradual implosion of the US$-centric fortress.
The new Eastern SWIFT bank system alternative
and gold based global trade settlement will
serve as the USDollar coup de grace. So many
aspects to the global monetary war would fill
a large book. It is about preserving the USDollar
in its primary role.

One
should laugh at the term Global Financial
Crisis since it is pure monetary war. It is
like calling the Beubonic Plague an influenza
outbreak. It is like calling Hurricane Katrina
a rainstorm. The major tools of the United
States in response are hyper monetary inflation
for domestic bank sector benefit, fraudulent
bond redemption in the $trillions without
prosecution for bank sector enrichment, and
endless war for private profit and control
purposes. The world's major players have focused
attention on removing the USDollar as the
tool of mass destruction, along with its USTreasury
Bond active market Jeep vehicle. Since
2012, the monetary war has taken a great turn
in global unification by the East against
the USDollar. The backfire against the
Iran sanctions has provided a turning point
in the war. Next watch the European theater
transform and suffer worse inflation as it
rejects the austerity poison pills ordered
by the elite banker medical teams. The pendulum
will soon swing very hard in favor of inflation
on the Main Streets of Europe. The bond market
will become the Intensive Care Wards in more
acute fashion. Expect eruptions in the United
States later this year at gasoline stations,
where tempers will flare. Food stores might
be another pressure point in the US, but gasoline
centers are my forecast for hot spots. To
be sure, people will struggle to eat, but
the nasty outbreaks comes when people conclude
they cannot get to work, or mobility suffers.
When the USDollar is more fully rejected,
the twin scourges of price inflation and supply
shortage will enter the stage, identifying
the early period of US Third World. Later
will come credit denial.

The
origins of the Global Monetary War are not
difficult to identify. Some believe it started
in 1996 when Greenspan declared an irrational
exuberrance as a malady. Others believe it
began when the Glass Steagal Act was rescinded
in 1999, which enabled commercial banks, brokerage
firms, and insurance firms to remove their
internal walls. My belief is that this conflagration
of war began in 1971 when the Bretton Woods
Accord for the Gold Standard was violated,
and it was super-charged in 1999 when the
Most Favored Nation status was granted to
China. The grant came with a hidden deal whereby
Wall Street firms leased the old Mao Tse-Tung
era gold & silver. Between 2005 and 2007
the USGovt betrayed China and reneged on repayment
of the precious metal bullion bars. That heated
up the trade war between China and the US,
which today has taken on a new gold acquisition
battle front. The current events could
bring down the USTreasurys and the USDollar,
since global trade settlement is at risk of
turning its back on the USDollar. Nations
seek new ways to settle like with gold or
bilateral swap facilities, otherwise known
as barter. Throughout the financial war, the
US households joined in the self-destructive
game by borrowing home equity, engaging in
heavy consumption, only to find themselves
subjects of home foreclosure and homelessness.
They fell on their own swords, led by Greenspan
himself. The United States is on the verge
of losing its global credit card, the license
used for consumption, fraudulent USTBonds,
and tickets to endless war. The USDollar is
soon to lose its global reserve currency status.
When it does, the US will find itself thrust
into the Third World.

◄$$$
THE PROPER PERSPECTIVE ON THE GREENSPAN DEPARTURE
REQUIRES EMPHASIS. HE EXITED THE MESSY MANSION
BEFORE THE STORM HIT THAT HE CREATED. CONSIDER
A UNIQUE DESCRIPTION OF THE USDOLLAR. $$$

Independent
analyst Bill Holter always adds excellent
observations. He commented on the Global Monetary
War without identifying it as such. The mindless
discussion of recovery has become a mockery.
Risk is not the appropriate term to use when
violent financial destruction is the assured
outcome. He wrote, "Greenspan understood
[the sequence] and retired early. He knew
that real estate was the second to last
bubble and did not want to be around when
the last bubble was blown. So here we
are at the pinnacle of the final bubble, the
sovereign debt bubble, and Ben Bernanke is
talking about risk as if more than one outcome
is possible. It is not. The world, including
and especially the United States has taken
on so much debt that it can no longer be paid
of in current chits. The end is known, but
how we get there is not. In other words, what
policy choices are taken [do not alter the
outcome]. On the one hand, policy makers can
allow failures (pretty good bet that this
will not happen). On the other hand, the policymakers
will print whatever is necessary with 99+%
probability. Either way, current chits will
become worthless. If they were to allow failures
to occur, the entire debt structure will come
down. In case you were wondering, debt is
what all currencies today are backed by. If
they choose to print, well this one is a no
brainer as to what will happen to chit values.

Sovereigns are having big problems rolling their debt
and bigger problems raising new debt. That
is why the USFed and EuroCB have blown up
their balance sheets by nearly $3 more trillion.
This is what has just now dawned on Bernanke.
They have fired 3 [gigantic] cannon shots
of liquidity and the patient is still flatlined.
What Bernanke welcomed, the chance to run
the central bank in depression conditions,
is now his life's nightmare. His jolts of
massive liquidity have not worked. He knows
now that they are not going to work. His
fault in logic? During the Depression, Dollars
really were as good as Gold. Now, Dollars
are simply chits that are backed by debts
that are backed by debts that are backed by
more debts. [Consider] his currency pieces
of chit."
The guarantee that the crisis will explode
into a catastrophe extends from the Fascist
Business Model, which Greenspan sanctioned
since his camp came to rule. Those in power
are the financial corporations responsible
for the systemic breakdown, along with their
many associates. They will not permit their
own bankruptcy, liquidation, and removal,
in order to permit the normal workable solution.
So the process heads toward total ruin.

◄$$$
FIVE US-BANKS FAIL IN WORST WEEK SINCE APRIL
2011. THE MARCH TO PERDITION CONTINUES WITH
ABATEMENT BUT LITTLE RELIEF. $$$

The
decline in financial failures is not an important
contradictory theme of the supposed USEconomic
recovery, whose vomit sessions belie recovery.
Since 2010, as a general rule, corporate bankruptcies,
debt defaults, and bank failures have been
decreasing steadily. The collection of available
banks ready to fail has diminished, leaving
the stable midsized banks, but also the big
Zombies to roam with full intravenous lines
attached to the USGovt dole. On Friday
April 27th, the Federal Deposit Insurance
shut down five banks to bring the total number
of failures to 2012. The event was the worst
Friday for bank closures since April 2011.
The banks plowed under were Palm Desert National
Bank out of California, Plantation Federal
Bank out of South Carolina, InterBank out
of Minnesota, HarVest Bank out of Maryland,
and Bank of the Eastern Shore out of Maryland.
Together, the five banks closed had combined
assets of $1.423 billion. Through the first
17 weeks of 2012, a ripe 22 banks with a combined
$6.5 billion in assets have failed. That compares
with 39 banks with a combined $16.96 billion
in assets that failed in the first 17 weeks
of 2011. Times are improving, hardly the cause
for celebration. The remaining survivors are
much larger banks, protected often from failure
even though insolvent. See the Yahoo Finance
article (CLICK HERE)
and for a complete failed bank list (CLICK
HERE).

◄$$$
THE EURASIAN LAND BRIDGE (TRAIN) FROM CHINA
TO TURKEY IS ON THE PLANNING TABLE. THE EARLY
STAGES OF CONSTRUCTION FOR THE WORLD'S LARGEST
MARKET IS UNDERWAY, THE CREATION OF EURASIA.
ONE OF ITS BACKBONES WOULD BE THE TRAIN. $$$

A
land bridge connecting China to the Western
Europe nations is in the works. The prospect
of an unparalleled Eurasian economic boom
dominant in the next century is at hand. The
first steps connecting the vast economic space
are being constructed with a number of little-publicized
rail links connecting China, Russia, Kazakhstan,
and parts of Western Europe. Alternative
project architects are quickly recognizing
the need to work around powerful obstacle
forces that have dominated for over 60 years.
Like with the Old West in the United States,
a rail infrastructure will play a major role
to building vast new economic markets across
Eurasia. Delivery supply is key. China and
Turkey are in discussions to build a new high-speed
railway link across Turkey, the largest project
ever undertaken in the country. The project
was perhaps the most important agenda item,
far more so than Syria, during talks in Beijing
between heads of state during the Chinese
meeting in early April. The proposed rail
link would run from Kars on the easternmost
border with Armenia, through the Turkish interior
on to Istanbul, where it would connect to
the Marmaray rail tunnel under construction
beneath the Bosphorus strait. Then it would
continue to Edirne near the border to Greece
and Bulgaria in the European Union. The
total estimated cost is $35 billion. China
has agreed to extend loans of $30 billion
for the planned rail network. The completion
of the Turkish link would finish a Chinese
Trans-Eurasian Rail Bridge that would bring
freight from China to Spain and England. For
China the piece would put a critical new link
in its railway infrastructure across Eurasia
to markets in Europe and beyond.

From
the 1960 decade onward, the United States
placed high strategic importance to Turkey,
but on a military basis. The visit by Erdogan
to Beijing, the first high level trip of a
Turkish Prime Minister to China since 1985,
was significant in demonstrating the high
priority China is placing on its relations
with Turkey. Erdogan met with Chinese Vice
President Xi Jinping, the man slated to be
next Chinese President. He also visited the
oil-rich Xinjiang Province, which hosts nine
million ethnic Uyghurs sharing a Turkic heritage
with Turkey, as well as ties to the Turkish
Sunni branch of Islam. The ill winds of past
conflicts in the region have passed, when
the USGovt acting through the National Endowment
for Democracy, encouraged a regime change
through the Uyghur uprising. Some slaughters
occurred.

In
process is the building of the world's greatest
market, for Eurasia. The continent of Europe
is the prize, and it is turning Eastward for
trade, security accords, and the future. An
essential element to building new markets
is a viable infrastructure. For the vast landmass
of Eurasia, high-speed railroad linkages are
essential to those new markets, in additional
to direct commercial ties between companies.
For the economically depressed countries
of the European Union, joining with the growing
economies of Eurasia offers a real way out
of the present crisis. See the Market
Oracle article by William Engdahl (CLICK HERE).
He has always had a solid grip on developments
related to Europe and Asia forging ties, along
many themes. The Jackass met him in November
2006 at a German conference. He was actually
quite arrogant and disagreeable, correcting
me three times on how the Petro-Dollar was
not a standard. My response each time was
that it was a practical defacto standard of
obvious nature, critical to underpinning the
USDollar in global trade. Finally, my remark
was more blunt, wondering aloud why the rest
of the financial and investment community
comprehended the defactor Petro-Dollar standard
except for him. He turned the conversation
into a useless exchange. We parted ways.

The
Eastern Alliance will develop Eurasia as a
gigantic trade region. The epicenters will
be Germany, Russia, and China. The Jackass
has mentioned the alliance before, to be joined
at the right moment by the Saudis and Persian
Gulf nations. The Saudis will bring with them
the new features for crude oil payments. The
Germans are the brains for architecture planning
and engineering expertise. The Russians bring
vast commodity and energy resources, with
diverse pipelines for delivery. The Chinese
bring tremendous wealth stored, a massive
array of factories, and a motivation to unseat
the American-Anglo power center. A consultant
with ties to Asia from Central Europe offered
a perspective. He has been a reliable source
of information. He wrote, "China will
not be able to shoulder this battle without
Russia and eventually Germany being in an
open alliance. Germany needs to be freed from
the European Union handcuffs and all the other
pointless politics in order to refocus and
realign its political and economic interests.
Russia is consolidating bigtime. The Western
media try to paint a picture of a brutal regime
suppressing its citizens. What a crock of
CIA / MI5 bullshxx. Running a Russian aircraft
into a mountain in Indonesia by manipulating
the feed into the navigation beacon is nothing
new, done recently. That is how they killed
off Clinton's problem with Ron Brown in the
Balkans. It is always the same game."
Nasty geopolitical chess game in progress.
The Clinton Admin was unraveling due to campaign
fund violations, and Brown was set to testify
on several criminal investigations. As for
the recent mass murder event, the guest list
was top Indonesian airline and top Russian
aircraft executives, plus the crew. The motive
was to discredit the new Russian passenger
aircraft.

## SIGNPOST SAYS GAME OVER

◄$$$
THE ENTIRE USTREASURY AND DERIVATIVE MARKETS
ARE COLLAPSING TOGETHER, THE INEVITABLE FINALLY
HAPPENING. A CONFLUENCE OF FACTORS HAS PUSHED
THE TOP-HEAVY STRUCTURES TO BREAK ALL AT ONCE.
DAMAGE IS ENORMOUS, NON-LINEAR IN ITS EFFECT,
AND UNSTOPPABLE. EVENTS WILL GO OUT OF CONTROL
VERY SOON IF NOT ALREADY. THE JPMORGAN LOSSES
ARE CLOSELY TIED TO THEIR VULNERABILITY IN
THE FINANCIAL SYSTEM THAT IS COLLAPSING. THEY
INCUR LOSSES TRYING TO ASSIST DEUTSCHE BANK
IN EUROPE. THEIR LOSSES ENABLE THE GOLD TO
BE REMOVED FROM THE CARTEL VAULTS. IT IS ALL
TIED TOGETHER. $$$

A
brief preface on climate change. Something
has changed in the last couple weeks. Usually,
since JPMorgan is exempt from proper accounting,
it need not disclose anything on its losses
in the interest of national security. All
of the banks are given a pass by the liberal
FASB rules. My belief is that a higher
power has decided enough is enough, and it
putting its boots on the banker necks in New
York and London. The financial crime wave
has finally forced the higher power to begin
retaliation, cleanup, arrests, and prosecution.
JPM CEO Dimon has been given orders to talk.
Their entire loss episode would have been
swept under the rug in 2009 or 2010. My belief
is the higher power comes from the East, and
involves truly staggering wealth that has
been reawakened, turned vengeful. No further
details here, but consult with Benjamin Fulford
and his latest writings. Maybe the Eastern
force sold USTBonds enough in March and April
to cause the great disruption to JPMorgan
and their derivative book, just to wreck them
on leverage and to trigger the unstoppable
breakdown process.

Hidden
behind the burning curtains are Fannie Mae
and AIG. Fannie is at the center of interest
rate hedges for their $3 trillion mortgage
book. AIG is at the center of derivatives
that went bad. My speculation, along with
Rob Kirby, is that both Fannie and AIG are
locked in a twisted tower that is collapsing
with JPMorgan and Deutsche Bank, a conduit
tie-line that causes mutual damage. The sovereign
bonds, derivatives, and big Western banks
are collapsing together. The entire monetary
system is collapsing. The Eastern forces recognize
the threat, respond to the imprudent Iran
sanctions, and will arrive on stage with alternatives
which will topple the monetary system further,
when it appears not to function any longer.

Friend
and colleague, genius forensic analyst Rob
Kirby wrote, "This leads me to speculate
as to whether Deutsche Bank's most recent
financial troubles might be derivatives related,
perhaps suffering from the same thing that
is now affecting Morgan." My excellent
banker source with US-German connections,
who revealed that JPM losses are at least
$18 billion, pitched in "SPOT ON"
as reply. The Jackass inquired as to whether
JPM had lost money trying to defend a large
hedge firewall for Deutsche Bank, and the
source said yes. This is very complex and
interwoven. So as it unravels and collapses,
it is all happening together across the Western
nations. Dimon is dead wrong and a liar to
claim their losses are isolated, not a broad
Wall Street problem, and is a one-off event.

In
1999, Bankers Trust was acquired by Deutsche
Bank. The Bankers Trust colossus, much akin
to AIG, had been the primary derivative underwriting
bank, but they almost died from the Long-Term
Capital Mgmt fiasco in late 1998. Some phony
story was promulgated about their distress.
They had been called The Fed's Bank
by the financial sector. No US bank was large
enough to acquire BT, so the Bundesbank through
Deutsche Bank stepped in. They took on a big
toxic load that has erupted at the surface
finally. The JPM losses relate to the sovereign
bond market (both USTreasury and Euro Govt
Bonds). The D-Bank problems are directly tied
to the JPMorgan problems, as losses will be
of large magnitude and deadly. The entire
system is collapsing. Leverage has been abused
for too long. The Western banking system has
been kept together like a pack of Zombies
since its death event in September 2008, and
the Powerz can no longer hold it together.
CEO Dimon looked visibly shaken, worried,
and scared in a sequence of press conferences.
He also might be slightly unaware of the impending
collapse. We are entering the land of non-linear
outcomes due to de-leverage process and absent
capital during margin calls enforced by angry
wealthy groups hell-bent on revenge. JPM and
DB have many enemies.

The triggers for collapse have been the longstanding 0%
enforced by the USFed via Interest Rate Swaps,
the gigantic annual $1.5 trillion USGovt deficits
to finance,
plus the absence of foreign creditors, the
heavy reliance upon the bond monetization
(QE to Infinity), the suspended accounting
rules for the Wall Street banks, the broken
European sovereign bonds, the strong fluctuations
in Euro Bond yields, the bust of Greek Govt
Bonds, the strains from Spanish and Italian
and recently French Govt Bonds, new elections
of political leaders who vow to end austerity
budget measures, and the decision by German
bankers to extend no further loans. Consider
the JPM woes to be backlash for attempting
to dismiss the Standard & Poors downgrade
of USGovt debt, and the heavy reliance upon
Interest Rate Swaps to create artificial demand
for USTBonds that did not exist, has not existed,
and will not exist.

No flight to safe haven has occurred, all being IRSwap
congames filled with press propaganda.
The Wall Street maestros conjured up huge
artificial USTreasury Bond demand from thin
air, reported in the Hat Trick Letter. But
the higher power has stepped in, with great
wealth, great influence, great resources (money
and people and agencies). They are meting
out justice. The dumbfounded regulators (USFed,
SEC, CFTC, FDIC, OCC) are not so clueless
as complicitous, part of the problem, having
assumed that JPM is expert, in control, and
protecting the US financial markets. They
are all the guilty parties, which work closely
with the big US banks in their artificial
structures and support devices that have gone
amok in an extreme way. They will all be on
the defensive in the coming year when the
full breakdown occurs. If truth be known,
the control centers are ESF, NSA, even BIS.

Turd
Ferguson reported from a Andrew Maguire conversation
that 100 metric tonnes moved out of London
alone in a recent week, all heading to Eastern
locations. The drain of the gold cartel
banks is in high gear, stripping them of their
ability to defend against their own gigantic
illicit short futures positions. Great
preparations are being made for a new gold-backed
trade system and barter system. Some severe
shock waves are coming. The USDollar is soon
to be isolated, dismissed, and avoided by
global financial sectors. The US-bound savers
will suffer from both a big devaluation and
also a forced migration into USTBonds for
pension funds (401k, IRA, Keough). The
search for risk-free or low-risk investments
outside the sovereign bond arena, outside
the big bank risk for derivatives, will eventually
lead to a tidal wave of gold investment.
Much more on the JPMorgan plague, actual stories,
and collapse are found in a following full
section. JPM is too big to fail, too big to
control, too big to govern, too big to confront,
too big to punish, too big to liquidate, too
entrenched to change. Repair and remedy will
not be the priorities. Instead, the priority
will be containment and preserved power. Therefore
the giant colossus will fall in the crowded
urban area, complete with grand destruction
in the powerful collapse, with many innocent
businesses and people killed or ruined.

◄$$$
ALMOST GAME OVER, A MOST ENCOURAGING NOTE
FROM INSIDE THE FOCUSED TOUR DE FORCE BATTLE.
ENORMOUS AMOUNTS OF PHYSICAL GOLD HAVE BEEN
REMOVED FROM THE GOLD CARTEL MEMBER BANKS
TOTALING 5000 METRIC TONNES WORTH OVER 1/4
OF A $TRILLION. GOLD BULLION IS BEING SHIPPED
FROM WEST TO EAST. A MAJOR BATTLE HAS CONCLUDED.
WATCH FOR TELLTALE CLUES OF SYSTEMIC BREAKDOWN.
THE TIME HAS FINALLY COME FOR THE END GAME,
WHICH CANNOT BE CONCEALED ANY LONGER. $$$

The
grandest transfer of wealth in history is
reaching a climax stage. The German gold trader
source added a chilling commentary. Notice
the reference to a $100 billion loss, his
eventual estimate in the coming several months.
He wrote, "The $100 billion JPM loss
might still be much too low, as there is an
event driven component in all of this. One
link in the chain breaks and the wheels come
off. If Kirby takes the time to calculate
through this incident, he might very well
come up with a high multiple of the $100
billion or even $trillions in eventual losses
for the big US bank. There are no end buyers
for these derivatives, all artificial creations.
It is a mega scam that even dwarfs Ponzi,
since it is the entire bond market structure
that underpins the monetary system. The question
is how much of these losses will be disclosed,
like an iceberg coming to the surface. It
is safe to assume that big changes are in
the offing. There is always the point reached
where enough is enough. The American-led
economic war against Persia was probably the
final trigger for some real decision makers
to put their foot down and tighten the noose
to the point of suffocation. It will get
very ugly very fast in an event acceleration.
The increase in off-market substantial gold
transactions, being solicited at the very
top, is absolutely stunning to see. The Boyz
need liquidity and they need it fast. The
only asset they can turn into cash is their
gold bullion stashed away in various locations.
The current events are from a new dimension
not seen in past years."

The
Paradigm Shift East is in full force. The
movement to end the official false paper front
of monetary management could come. It will
not end, but be revealed and prosecuted. Expect
Nuremberg Banker Trials in the future. Great
volumes of gold bullion are moving. When
my gold trader source was asked how much gold
has moved from West vaults to East vaults
since the Leap Day Massacre on February 29th,
he responded without hesitation, replying
5000 metric tonnes. That is five thousand
metric tonnes of gold bars worth between $250
and $260 billion, half as much as Fort Knox
housed when it actually held the national
treasure. It has since been looted. In a highly
illustrative and shocking (positive) message
the same veteran gold trader explained "I
have seen some major quantities of metal being
moved in my many years. However, what I
am seeing right now is unprecedented in quantities
and capital being moved. The East is converting
its unlimited liquidity into hard assets of
which Au and Ag are only one core component.
The Western depositories are currently
being raided at discounts and not premiums,
since the time window that has been created
allows to do that. However, that window
is closing swiftly and once closed, the
price for metal will go through the roof."

One
must wonder what the time window mentioned
is. Let me speculate. Perhaps time before
the Euro crisis takes a major planned turn
(see German-led new Euro Mark currency). Perhaps
strictures extending from Basel 3 bank rules
in force. Perhaps some time constraints on
derivatives. Perhaps some threat to dump USTBonds
by China, and convert a portion to gold bullion.
Perhaps some urgent directive from a higher
authority. After a seeming tough messy
but productive week in the gold trading trench
warfare, my reliable gold trader source offered
a summary with more expressed satisfaction
than ever conveyed in all the years we have
been in contact. It is not completely
over as a war, but the Battle of the Bulge
in Europe and Battle of Midway in the Pacific
seem concluded, each a major victory. This
message is of chest pounding with a foot atop
a dying victim. The gold price is surely depressed,
but the gold cartel is reportedly mortally
wounded. The path upward might be cleared
to the point of ending this latest round of
price suppression. The Good Guys have finished
a mission for this round.

The
gold trader has a keen knowledge of WW2 and
hardened experience from Russia in the 1990
decade. In a final highly illustrative and
shocking (positive) message, he wrote "This
is great. The market is cleaned out when it
comes to physical. The purchases to drain
the cartel are 1000 MT [metric tons] per shot/transaction,
5000 MT in all. The Boyz are illiquid and
have to sell at budget bargain prices.
The ones they used to patronize and torment
are now screwing them back using a telephone
pole up the hind quarters with the tip wrapped
in razor wire. No prisoners are being taken.
I have never seen such merciless executions
to that magnitude in my entire career. The
target banks call for help and protection,
not knowing that they are actually confronted
with their executioners. It must be a lonely
feeling when the only thing they sense is
their own warm blood running down their bodies.
They know they are done. It is like the final
scene in Enemy at the Gates where Vassili
Zaitsev, the legendary Russian sniper, out-maneuvers
the German Major Konig sharpshooter. The major
takes off his cap, looks at Zaitzev who put
a bullet right between his eyes. The real
players know when it is game over. However,
we shall see fundamental change unfolding
and developing in exponential gold price swings,
both ways, up and down." He forewarns
of very volatile price movement as the gold
cartel turns desperate and loses control.
The gold price movement will not be
straight up, but scary volatile.

Hence
around five major enormous transactions were
executed in the last several weeks, totaling
a mindboggling 5000 metric tonnes, as the
gold price was held down until the big sales
were completed, draining the gold cartel.
The Eastern entities were not bidding up
the gold price, but rather holding it down
to complete the sales. The current round
is apparently over, or soon over. Margin call
mop-up exercises are in progress. Major losses
are coming from the broken structures that
work with excessive leverage to hold together
the artificially priced systems in an array
of phony facades. Evidence of the JPM wall
cracks and deep damage will not be so much
admissions of loss. It will be broken structures
and pieces breaking over there and over here
and every which way. Watch USTBond yields,
a Spanish Bond auction complete failure, a
rising Societe Generale credit default swap
rate, a rising Lloyds of London credit default
swap rate, an unstable higher LIBOR swap rate
composite, a Deutsche Bank deposit flight,
or a $100 single day jump in the Gold price.
Telltale signals come.

This note is encouragement to the extreme for investors
to stay in the game, hang onto the gold &
silver bars, and wait for the rise like a
phoenix in precious metals price, since the
resistance by the cartel has been significantly
removed to the point of assuring victory with
a heap of confidence.
The Eastern Coalition has transferred over
one quarter of a $trillion in gold bullion
in under three months from the Western gold
cartel camp and munitions cache. They are
left defenseless in New York, London, and
Western Europe, unable to stop what comes,
which in plain terms will be a rise in the
gold price that zooms past $2000/oz and finds
its rightful level based on value and equilibrium
free from the tight grip of suppression. Some
important bank failures are coming, including
Deutsche Bank. If DBank fails, expect JPMorgan
to be rocked and shaken to its core with severe
crippling losses. The Jackass cannot promise
a date when the historical phoenix rise will
occur, but it is on this side of the horizon,
hardly the distant future. The outcome is
assured. It is unclear what the held laurels
will look like or what the breathed air will
be like or what the viewed sunset will be
like, relaxing and healing from the long battle
waged, sitting on the porch sipping iced tea
or Cuba libras or whiskey sours. Details on
the denouement are not at all clear. More
battles will come, but maybe more akin to
cornering rats with POW gatherings. See the
movie saga background and details (CLICK HERE).

◄$$$
CONSEQUENCES OF REMOVED PHYSICAL GOLD METAL
FROM THE CARTEL BANKS ARE EXTREMELY POSITIVE.
TAKE GREAT ENCOURAGEMENT IN THE POTENTIAL
THAT LIES AHEAD FOR MUCH HIGHER PRICES, AFTER
THE IMPEDIMENTS ARE CLEARED AND OBSTACLES
PUSHED ASIDE. $$

The
important element in the gutting process is
the gold cartel cannot defend their naked
short gold position without gold physical
metal. They use leverage nowadays to defend
it, and lately extreme leverage since their
base is shrinking significantly. Without
the base collateral for leverage, they are
vulnerable to attack. Without the base physical
gold collateral for defense, they are doubly
vulnerable, if not helpless. Down the road
in the near future, the price attacks will
be on the upside, since the Eastern Coalition
will not see the ample stacks of gold bars
in London or New York or Swiss to pursue in
raids with low-ball price held with brute
force. Then the gold price will zoom past
the $2000/oz price. Silver will tag along
for the ride in a similar fashion, zipping
past $80/oz. The incredulous will simply have
to watch, wait, and see. The naysayers are
worth ignoring, since they cannot explain
a single event in the mounting crisis.

Final words of warning. Price is not the
relevant issue at the moment, but gold supply
instead. The gold cartel cannot defend against
attacks on gold manipulation in their vast
portfolio of naked shorts without the benefit
of reserves and physical metal. They are
being stripped of their defensive material,
gold bullion. Neither can they work to stabilize
the USTBond asset bubble, due to burst soon,
since their capital is exiting in gushers.
The USFed will be isolated without the
JPM buttress, the USGovt Bonds more subject
to the nasty jolts of Supply vs Demand, tainted
by pure Weimar firehouse inflation. The
JPM monster is never out of the way, to be
supported to the end. They are mortally wounded
and going down, thus very dangerous. Consider
some real imminent threats. They are capable
of harming family members of enemies from
inside the gold camp. They are capable of
stealing accounts at big bank brokerage firms
like Morgan Stanley for instance or Bank of
America or Citigroup, done in retaliation.
They can cause a bank holiday for the required
darkness.

JPMorgan
is capable of causing a financial false flag
event like a virus to the US banking system
blamed on Iran, after which several hundred
thousand private accounts go missing when
a big financial firm is killed for looting
purposes. The booty from the theft might be
totally inadequate for their cash needs, but
their motive might be spite, revenge, and
vile humors. They might dictate the USGovt
to confiscate the personal retirement accounts
and bank certificates of deposit, which do
total well over $1 trillion. The sub-headline
is clearly written on how the Leap Day Massacre
set in motion the powers from the East with
motives toward good, toward fairness, toward
justice. They are not saints, but they offer
a better system free from pervasive fascist
elements. The West banking centers are dominated
by the forces of evil fought in World War
II, the white collar war criminals having
migrated to New York, London, and Zurich.
It is a time to be careful while enjoying
the next chapter of a fast rising gold price,
remaining out of the line of fire.

## JPMORGUE ZOMBIE PROCESSION

◄$$$
THE ICON JPMORGAN HAS SHOWN BIG CRACKS. THEY
DEFLECTED ATTENTION AWAY FROM THE MONSTER
ASSET BUBBLE WITH OTHER LIES ON THE LOSS AMOUNT.
EXPOSURE IN EUROPE IS OVERSHADOWED BY EXTREME
LEVERAGE AND PRESSURES IN THE USTREASURY MARKET.
THE ZOMBIE COLOSSUS WILL GROW BIGGER AND MORE
DANGEROUS AS IT LOSES MORE CAPITAL (BLOOD).
JPMORGAN IS VULNERABLE TO EUROPEAN LOSSES,
BUT WORSE, SO ARE ALL WALL STREET BANKS. THIS
IS HARDLY A ONE-OFF ISOLATED EVENT. IT IS
SECULAR AND SYSTEMIC. $$$

In
preface, one must be clear. It is an impossible
task to enforce 0% on short-term USTBills
when new USGovt debt piles up as $1.5 trillion
annually, which has continued for three full
years. The violations of Supply vs Demand
dynamics are too large in defiance to the
natural order. JPM sits on massive toxic portfolio
of mortgage bonds and sovereign bonds. JPM
insures the rotten meat of bonds with derivatives.
JPM embodies several big markets, and thus
cannot hedge against itself unless done on
another planet. JPM is a criminal organization
that lies incessantly without conscience.
JPM is dying but will not be permitted to
die, instead to morph into a bigger ugly dangerous
zombie. It will steal all the funds it can
that are not nailed down, and do so with impunity
or conscience.

A private European banker source confided that the JPMorgan
loss is more like $18 billion, with some damage
suffered from sovereign debt in Europe, acting
as brokerage intermediary on behalf of Deutsche
Bank. Gold is being drained from major European
banks that surely include the giant Deutsche
Bank. Their big banks are suffering from gigantic
bond losses tied to Southern European nations
(both sovereign and commercial). They are
badly insolvent, and recently due to tighter
reserve requirements, the LTRO backfire, the
rejection of austerity budget measures, and
the rising government bond yields, the big
Euro banks are suffering from massive liquidity
problems.

Wall
Street bears systemic exposure to Europe,
exactly like the big Euro banks. Since
the Wall Street banks served last autumn as
the primary lender to Europe, even for derivative
underwriting to Europe, they constructed a
liability cable line to Europe. The risk
is fully shared, even with London banks. Late
in 2011, the second Dollar Swap Facility was
constructed (the first was 2009). That gave
relief to the Wall Street banks. They stopped
with the credit and underwriting around November,
when the USFed stepped in. The Wall Street
banks found themselves exhausted and over-extended.
Clearly they appealed to the USFed to take
control of the collapsing situation. JPM CEO
Jamie Dimon lied through his teeth when he
claimed the exposure by JPMorgan was not endemic
across the big US banks. It obviously is.
It is not a one-time loss, and time will prove.
More major shocks are to come. Imagine all
the problems caused by little Greece. The
next round of bond crisis and debt finance
will be centered on Spain, Italy, and France,
which together are 15 times bigger than Greece.

The
recent movement by Germany away from the bailout
table was prompted by a realization that Italy
alone was too big to aid. So the German bankers
halted all relief efforts and the troubles
really accelerated. Little Greece was just
the preview sample in the window case. Dimon
denies that this under-stated $2 billion loss
is systemic across Wall Street, when obviously
it is, extending to the German giant bank.
JPMorgan is widely known to be the most risk
averse member on Wall Street, which means
other investment banks in South Manhattan
will come forward with major losses. As with
Greenspan the liar, concentrate on the
topic in focus, ignore the words, expect
the worst, in order to capture the true message.
Dimon also claims this loss is an isolated
event. It is clearly not and will be repeated.
Go farther, and conclude that lack of liquidity
might provide a Prima Facie case for motive
to steal MFGlobal accounts by JPMorgan.
Recall Bernanke claimed the subprime mortgage
problem was both isolated and contained. It
was neither. These syndicate bosses are accomplished
chronic liars.

◄$$$
JPMORGAN IS DESPERATE TO CONCEAL A VAST DERIVATIVE
BOOK LOADED WITH DECEPTION ON INTEREST RATES.
THEY ADMIT THE EUROPEAN BOND ORIGIN FOR LOSSES,
SINCE IT OCCURS ON FOREIGN SOIL WHERE THEY
CLAIM THE SYSTEM LACKS STRENGTH, RESILIENCE,
AND EXPERIENCE. THE Z.I.R.P. POLICY IS NOT
DEFENSIBLE WITH GARGANTUAN ANNUAL DEFICITS
TO FINANCE AND ABSENT BUYERS. THE WEIMAR STRAINS
ARE STARTING TO SHOW, ESPECIALLY AFTER A WHIPSAW
EVENT IN APRIL ON THE 10-YEAR BOND. LOSSES
ARE AT LEAST 10 TIMES AS LARGE AS THE $2 BILLION
STATED. WITH ANY MILD RISE IN LONG-TERM RATES,
THE LOSS WOULD BE 50 TO 100 TIMES LARGER WITH
EASE. $$$

In
April the Bernanke Fed committed a blunder.
In hopes to regain respectability, they talked
openly about a return to normal interest rates.
They described the early steps toward an Exit
Strategy without using the label. They had
been clever in fooling the bond market community
with the Operation Twist, which was essentially
continued Quantitative Easing, in covering
foreign bond sales. The USGovt can never realize
a return to normal rates, for reasons having
to do with Interest Rate Swap contracts and
USGovt borrowing costs. The IRSwaps would
result in countless $trillions in losses.
A move to 7% or 10% long-term rates, which
makes perfect sense in the prevailing price
inflation environment compounded by unaddressed
$1.5 trillion annual deficits, and broken
politcal apparatus to bring down spending,
not to mention the endless costly wars, would
cause in my estimation between $20 and $40
trillion in sudden losses from IRSwap contracts
alone. Of course, much higher bond yields
would send borrowing costs for the USGovt
deficit toward the $2.0 trillion mark at a
minimum. So rates cannot be permitted to rise,
and the Interest Rate Swap contract must continue
to be used. But more importantly, the attention
must not come to the IRSwap ever. So JPMorgan
lied and cited the European sovereign bond
market and the derivative market linked to
it. The deflected attention away from USTBonds,
their plague.

The USFed is stuck at 0% official rate forever, as ZIRP
will persist as far as the eye can see. Heck, Japan still is stuck at 0% after 20 years, and
they had annual budget surpluses, an industrial
core, and huge personal savings. The United
States can expect no better, and in reality
should expect a more foreboding path. The
USGovt will be stuck with ZIRP and artificially
low 2.0% long-term rates forever. The entire
financial system will implode if an Exit Strategy
were put into practice. Any justification
of the exit from ZIRP and 2% long rates is
lunatic and not based in anything rational
or defensible. The USGovt will continue at
0% until the USGovt debt default, which will
come in the form of a debt restructuring after
more $trillions are tacked on, after the foreign
creditors become avid net sellers, after the
obvious deployment of the Printing Pre$$ is
seen as crystal clear for the hyper inflationary
device with Weimar nameplant. The debt
default will come when the USDollar is no
longer the dominant currency. It will come
when the USEconomy faces the twin scourges
of price inflation and supply shortage, since
the USDollar will not be widely accepted in
trade.

Consider
events in late March. The 10-year USTreasury
yield (TNX) rose to 2.4%, then came back to
1.8% all in the space of a few short weeks.
In financial market parlance, it is called
a WhipSaw. In no way did JPMorgan avoid losing
money in interest rate derivatives, commonly
leveraged 30:1 or more (even 100:1). The USFed
helped push down the TNX to stop hemorrhage
of JPM and Morgan Stanley. JPM alone owns
a $80 trillion total derivative book, of which
82% are interest rate derivatives. The
USTBond lies on the other side of the Interest
Rate Swap contract. The remainder of the book
consists of credit derivatives like bond insurance,
known as Credit Default Swaps. JPM has 12%
exposure in credit derivatives, lately dominated
by Euro sovereign bonds in volume. With
something like $65 trillion in Interest Rate
Swaps on their books, the WhipSaw from 18
to 24 and back to 18 on the TNX probably choked
the JPM neck into showing a blue face, or
a pendulum swing to sever a leg. Blame
has been admitted on the sovereign debt problem,
but the much larger vulnerability comes from
the defense of the indefensible 0% rate, aggravated
by the $1.5 trillion deficits, during stormy
seas that deliver WhipSaws. JPMorgan
in no way wishes to bring attention to the
derivative losses extended from USTBond defense
of the ZIRP policy. It is a futile
task that cannot be won. The Interest Rate
Swap produces artificial demand, that the
financial press avoids in propaganda stories.
Demand for the USTBond has vanished. Look
for a rally in long USTBond in order to take
JPMorgan out of the cold troubled waters with
ZIRP icebergs. It will happen without true
demand. Thanks to Rob Kirby for the following
chart.

JPMorgan
is not alone in interest rate derivative exposure.
The OCC reports JPM with $71.0 trillion in
notional value, Bank of America with $68.5
trillion, Morgan Stanley with $52.2 trillion,
Citigroup with $50.2 trillion, and Goldman
Sachs with $48.3 trillion. They are called
the Big Five. A gulf appears to the next player,
with HSBC having $4.3 trillion in interest
rate derivatives, followed by $3.3 trillion
at Wells Fargo. Expect many more multi-$billion
losses for the Big Five, who will also lie
by not admitting the losses are due to defending
the indefensible USTreasury Bond bubble at
0% with $1.5 trillion new supply each year,
where the main buyer is the USFed in monetization
programs and its backup buyer is the artificial
Interest Rate Swap contract.

◄$$$
THE JPMORGAN LOSSES WILL GROW AND GROW AND
GROW. THEY ARE MUCH LARGER THAN ORIGINALLY
REPORTED, NOW ESTIMATED AT $5 BILLION. THE
INTEREST RATE SWAP BASIS OF LOSS IS PUBLICLY
DISCLOSED, AS THE JACKASS FOREWARNED. THE
ENEMIES OF JPMORGAN WILL FORCE GREATER LOSSES.
$$$

The
admission of a loss is usually the start of
a long arduous process. A contributor to LeMetropole
Cafe run by Bill Murphy at GATA, made some
great comments. It pertains to vultures. He
wrote, "By the way, in business the
first news of a loss is never the last news.
The losses always grow, anywhere from 2x to
10x that first announced. Here is the bold
print: All any hedge fund has to do now is
know what large bets in what market that JPMorgan
has on, and bet against them, because the
other side of the table (from JPMorgan) has
its so-called balancing acts trades now undone.
Their hold cargo is on the loose! I guarantee
every hedge fund manager in New York is working
this weekend right now as this is being typed,
looking for those counter positions to take."
The pressure will force into the open the
rest of the unstated JPMorgan losses, and
add to them, putting momentum in the opposite
direction. It is much like placing a crowbar
in a crack and exerting strong force, precisely
in the crack where it is most vulnerable.
May we all wish JPM and its criminal executives
the worst of possible fates, followed by legal
prosecution, public ignominy, and banishment
for life in the financial sector. Let them
manage their own secluded prison system currency
scheme based on cigarettes, or teeth.

Not
wasting any time, the vultures have acted
quickly, like in a single week to exploit
the JPM advertised weakness. This is why the
giant bank does not honestly state how ruinous
their positions are, and admit they could
easily suffer $100 billion in losses maybe
by year 2013. The estimated trading losses
suffered by JPMorgan Chase have surged in
just days, surpassing the bank's initial $2
billion estimate by at least $1 billion,
according to people closely familiar with
the criminal organization. They admit a $3
billion loss total, but also difficulty in
measuring the loss. It will be a $5 billion
loss before July. Even CEO Dimon revealed
how the loss figure could double within the
next few quarters. Hedge funds and other
investors have taken advantage of JPMorgan's
distress, fueling faster deterioration
in the underlying credit market positions
held by the bank. The crowbar is being applied,
and will be yanked with greater force to widen
the crack as time passes and their true vulnerability
is learned. See the New York Times articles
(CLICK HERE).

The
story continues on expanding losses. The
Wall Street Joural reported the JPM losses
are estimated to be at least $5 billion. Perhaps
more interesting, the WSJ states that Jamie
Dimon personally approved the Delta-hedging
of its Interest Rate Swaps positions which
has resulted in the massive derivatives losses
for JPM. Here is the significant nut here.
The losses extend from control of the USTreasury
Bond market, not Europe. The losses
are from the challenges to manage the USTBond
market using the powerful Interest Rate Swap
contract mechanism. Soon analysts
will conclude the demand for USTBonds has
been artificial all along, with no flight
to safety. The original disclosure by CEO
Dimon was the deflection story about hedges
on European sovereign bonds. As the Jackass
openly surmised a week ago on widely covered
Turd Ferguson radio interview (CLICK HERE),
the losses were from IRSwaps. Sometime next
year, the true loss figure will be over $100
billion as sure as the calendar turns pages.
See the Silver Doctor article (CLICK HERE).

◄$$$
JPM STOCK HAS BEEN BRUTALLY HIT, AND DESERVEDLY.
THE EQUITY LOSS AMOUNTS TO $36.5 BILLION SINCE
THE END OF APRIL (22%), WHEN INVESTORS STARTED
TO SNIFF BIG PROBLEMS. THE BIG BANK WILL HAVE
MORE DIFFICULTY IN MANAGING ITS MANY MARKETS,
SINCE IMPLIED LEVERAGE JUST ROSE SIGNIFICANTLY.
$$$

◄$$$
BOND PRINCIPAL SWINGS ARE NON-LINEAR OR PROPORTION
TO THE BOND YIELD MOVEMENT. THEY ARE MUCH
REDUCED, BUT ENOUGH TO CAUSE SIGNIFICANT DERIVATIVE
DAMAGE. A 3% TO 4% MOVE IN BOND PRINCIPAL
CAUSED FRACTURES AFTER THE 30:1 LEVERAGE IN
INTEREST RATE SWAPS. $$$

Some
perspective must be gained on the bond valuations
and their effects. The 10-year USTreasury
yield went from 1.8% to 2.4% and back to 1.7%
since March. That is a 30% to 35% move in
the TNX yield index, but the principal values
dont move in similar ratios. Long ago, when
studying the available profit in bond ownership,
when 0% was approached, the Jackass learned
that the answer is not much, but some. Better
than losing money in other risky assets. Many
believe that the swing resulted in a large
move in the principal value. That is incorrect.
When the bond yield is low, the compounding
effect is low, and therefore the principal
value swing is minor but enough to render
damage. Consider the actual numbers and the
math. The UST went from principal value 131.2
down to 127.5 during the rise in the TNX,
but a move of only -3.2% down. However, it
is enough to completely upset JPM and cause
great disorder in their Interest Rate Swap
book, a narrow giant awkward tower. The
swing back up saw a move from 127.5 to 133.1
which is bigger, like a +4.4% rise. Add
in the 30:1 leverage on the moves to see a
100% swing after leverage is accounted for.

The
JPM Tower of Interest Rate Swaps is $71.04
trillion high, as per the Office for Comptroller
to Currency in their December 2011 tally.
Therefore, even 3% does big harm after
great leverage as they attempt to enforce
a 0% rate in a storm of $1.5 trillion annual
bond supply whipping like high winds.
Expect the JPMorgue losses related to IRSwap
management to be well over $5 to $10 trillion
in a couple years. Regardless, the JPM Tower
is broken and will fall to the ground in an
unstoppable process. The Jackass is very grateful
to be part of a team that takes in reliable
information from a reliable German banker
source, processes it with the help of Rob
Kirby using his bond trading desk and derivative
experience, so that we can dismiss the official
story and project losses accurately. It is
important to comprehend the math of bond principal
values, and to have the math side straight
and correct. Keep open the possibility that
the USTBond selloff in March might have been
engineered by the Eastern Coalition to trigger
the JPMorgan breakdown.

◄$$$
A MONOLITH VAMPIRE EFFECT HAS BEEN AT WORK
FOR THREE YEARS. THE SCOURGE UPON THE FINANCIAL
STRUCTURES WILL CONTINUE, SINCE JPMORGAN IS
THE OPERATING ARM OF THE USFED ITSELF. IT
WILL NOT BE ALLOWED TO FAIL, BUT INSTEAD BECOME
A GIGANTIC ZOMBIE MONSTER WITH EVEN MORE RIGHTS
TO STEAL, DECEIVE, AND DESTROY. $$$

In
short, JPMorgan will not be killed by natural
forces or by enemies. It will not die. It
will not fail. It will suffer mortal wounds
and endure a pathogenesis, a path toward the
cemetery. It will continue to be a combination
of a Zombie, a Black Hole, a teetering Tower,
and a free wheeling Monster on the loose.
Pick your metaphor. Its insolvent condition
will grow worse. Its sucking power to remove
wealth in the black hole vortex will grow
worse. Its hunger and appetite to feed off
wealth bodies will grow worse. Its desperation
will grow worse to the point that criminal
activity will occur more often in the open,
like with MFGlobal. A false flag attack on
the finance sector could enable a great heist.
As their condition deteriorates in accelerated
fashion, they will force the USFed into the
next higher gear of extreme hyper monetary
inflation from the official hidden rescue
in order to preserve their banking and political
power.

The
JPM house is the operating arm for the USFed,
which should never be kept from focus. It
has morphed into a Weimar beast but with admiration
and adulation. Therefore it is above the law
on naked futures shorting, above the law in
oversized positions, above the law in MFG
account theft, above the law in mortgage bond
fraud. In fact, JPMorgan manages the Iraq
Export Bank in Baghdad, which serves as the
narcotics money laundering location for the
Afghan heroin. This is a powerful dangerous
criminal syndicate organization not subject
to laws, steeped in privilege, showered with
executive bonuses. So the syndicate must save
JPM in order to save itself. The USFed balance
sheet is intertwined with JPM balance sheet,
not subject to the proper accounting rules,
as dictated by the previous administration,
in the interest of national security. The
deep JPM criminality is intertwined with the
USGovt itself.

◄$$$
THE DE-LEVERAGE DAMAGE HAS BEGUN, INFLICTED
UPON A BADLY WEAKENED INSOLVENT SYSTEM WITH
TWO MAJOR PILLARS IN DEEP DECAY. THEY WILL
NOT BE PERMITTED TO FAIL, SINCE THEY CONTAIN
THE RULING BODY AND THE CENTRAL BANK AND USDEPT
TREASURY DUO. $$$

For
prefatory comedy relief, recall Bernanke said
on May 10th that US banks have plenty of liquidity,
a bold lie proved false by the JPM loss announcement.
In a nutshell he said, "Banks are
in great shape, the crisis is over, all have
good liquidity." Bernanke has been
as wrong consistently as he is revered. Recall
also the direct objection made by CEO Dimon
against the Volcker Rule, since wonder boy
wanted to avoid the embarrassment of such
major losses, even if the reality is almost
10 times bigger for the loss. Recall the pressures
from Basel 3 Rule on reserves management,
putting banks in a difficult position that
could only lead the casual observer to conclude
that the Basel castle dwellers wish to collapse
the system in order to install the next level
of fascist rule. Italy has been captured.
The US official institutions will survive
like JPMorgan and GSax, but they are like
the ugliest biggest fruits on a dying vine,
sucking vitality from all other fruits in
true vampire fashion. The Matt Taibbi image
of vampire squids comes to mind.

The
US is heading for the Third World, with some
strong monoliths to guard the gates and control
the doors to the syndicate of waste, fraud,
counterfeit, and ruin. External events seem
incapable of halting the bleeding, in a grand
hemorrhage process that will conclude only
with a USGovt debt default. Despite the
wonderful glowing report by Bernanke on JPMorgan
as having good liquidity, Fitch Ratings disagrees.
They downgraded both JPMorgan on its short-term
and long-term debt, with the latter falling
to A+ from AA-. The country's largest
bank by assets, JPM was also placed on ratings
watch negative. Fitch said it views the $2
billion loss as manageable but added that
"the magnitude of the loss and ongoing
nature of these positions implies a lack of
liquidity" in direct contradiction
to the grotesquely incompetent Bernanke as
central bank head. Rick Rule believes JPMorgan
has the potential to bring down the global
financial system in a worse chapter than in
late 2008. See his interview on King World
News (CLICK HERE).

◄$$$
THE LETHAL EFFECT OF MUTUAL DERIVATIVE RISK
COULD SOON BE SEEN. THE NETTING ON DERIVATIVES
IS DESCRIBED BY WALL STREET AS NEUTRAL, REMOVING
RISK. INSTEAD IT IS MUTUAL DEADLY RISK WHEREBY
BOTH PARTIES STAND RISK OF FAILURE, UNABLE
TO HOLD EACH OTHER UP. $$$

The
JPMorgan loss exposes a hidden risk not mentioned
even by the solid analysts. Remember all the
nonsense about derivative netting, whereby
Bank X covers Bank Y which covers Bank Z which
covers Bank W, rendering all neutral and aok.
Not in this world!! The JPM loss will lay
out as vulnerable some counter-parties no
longer protected by JPMorgan as they begin
to bleed capital and whittle away the base
from which to underwrite risk. Soon will be
exposed how both sides are either dead or
dying. They are not both net neutral, but
rather both at risk of sudden vanish of capital.
Imagine two men hanging by the neck on two
tree limbs side by side. Observe two tree
limbs, two men, same rope, opposite ends,
in counterweight. They are net neutral in
the weight and force, but they are both at
risk of a quick death. It is hardly an offset
that is net neutral as described.

◄$$$
THE POWERZ ARE SHOWING HOW OVERWHELMED THEY
ARE. THE NEXT CHAPTER HAS BEGUN MARRED BY
RAPID CAPITAL LOSS AND MIDSIZED BANK FAILURES.
THE PROCESS REQUIRES A TRIGGER, AND THE GREEK
DEBT DEFAULT WILL BE SUCH A TRIGGER. SPAIN
HAS THE CAPABILITY TO SERVE AS A TRIGGER ALSO,
ONE THAT MIGHT OCCUR SIMULTANEOUSLY. THE POWERZ
CAN NO LONGER CONTAIN THE COLLAPSE AND SUPPORT
THE PLATFORMS. $$$

The
Powers That Be are overwhelmed and cannot
manage what is happening nor what is coming.
The system is too complex to monitor, analyze,
and control, like herding cats in an open
field. The Jackass has owned cats. Weakness
begets weakness, as the illiquidity has given
license for fire to catch and spread. A unique
battle is coming next, where JPM attempts
to prey on its clients and partners, while
its enemies attempt to render more damage
to JPM itself, seen as wounded and vulnerable.
The colossus is utterly hated. They are dying
but will not fall dead. They are dying in
an endless process. The USFed can endlessly
supply them with fresh tainted money, but
that process will only have the insolvent
creature grow. They are a Zombie to grow bigger
and uglier and more larcenous and violent.
Their counter-parties and clients are at grave
risk of being targeted for thefts, frauds,
deadly traps, deceptive games, and more. As
control is lost, the monster will grow and
roam and ravage, with public calls to contain
it. The USGovt will do nothing, will continue
to cover up its criminal activity, and will
enable further rapacious deeds. Foreigners
will be called upon to limit the damage. This
is a combination of a Weimar storm and a Fascist
raid heist during the collapse of a Paper
Fortress. If this featured prospect event
is repeated, then fine, since it must be repeated.
Let this be a warning, a dire warning of a
rampaging monster on the loose.

◄$$$
THE RECENT JPMORGAN LOSS COULD BE AN INDIRECT
EFFECT OF THE EXTREME FAILURE IN LONG-TERM
REFINANCE OPERATIONS (LTRO) DESIGNED POORLY
BY DRAGHI AT THE EURO CENTRAL BANK. MANY BIG
BANKS ARE SUDDENLY DEALING WITH ACUTE ILLIQUIDITY
ON THEIR NEWEST POSITIONS GONE BAD. $$$

This
line of analysis is relevant only for the
fraction of the official JPMorgan story where
their explanation is accurately true. Blame
by the giant bank is largely placed on risk
hedge contracts against sovereign debt failure,
but given the movements, the true story
seems more like trying to push the JPM weight
around and squeeze profit from the world markets
in an effort that was resisted. JPM executives
jump to justify their trading activity as
mere hedging to alleviate risk, but even Senator
Carl Levin acknowledges their style adds to
risk, not lessens it. My gut feeling is that
the European sovereign debt distress accounts
only for 10% of the loss effect. If the actual
loss was indeed $18 billion, then perhaps
the admitted loss of $2 billion pertains only
to the 10% fraction disclosed. The rest is
explained by my analysis on USTBonds and IRSwaps.

Nonetheless,
follow the argument to reveal yet another
extreme point of bond market breakdown across
the Atlantic. A market run on the big Euro
banks is in full force. The JPMorgan losses
are in part explained by the Euro sovereign
debt run, but also by enforcement of the Interest
Rate Swap to maintain the 0% official rate.
The ZIRP is desperately needed and cannot
be deviated from, or else the entire Paper
Fortress is yanked down hard in a gravity
event. The ZIRP policy of 0% enforces a
bizarre environment with zero gravity that
cannot be sustained with heavy objects floating.
Focus should be given to the failure of the
Draghi Long-Term Refinance Operation, which
has resulted in some dead limbs on the JPM
hydra. The plan was poorly conceived, badly
designed, and dangerously administered. With
focus on the JPM loss, not enough attention
is given to the failure of the LTRO in providing
a solution. That attention is beginning
to gather momentum. Draghi should be ousted
for its failure in the first volley dealt
by the GSax preppie lieutenant at the Euro
Central Bank.

◄$$$
ROB KIRBY PROVIDES A FINE FINANCIAL FORENSIC
ANALYSIS IN REBUTTAL OF THE JPMORGAN OFFICIAL
STORY. IT IS REPLETE WITH LIES, DECEPTION,
AND DEFLECTION. THE FALSEHOODS COULD BE PROVED
IN THE NEXT SEVERAL MONTHS AS OTHER BIG WALL
STREET BANKS SUFFER SIMILAR LOSSES, TO PROVE
THE JPMORGAN ORDEAL IS NOT A ONE-OFF EVENT
AS CLAIMED. DIMON AND HIS FELLOW EXECUTIVES
PREFER TO DEFLECT BLAME ON EUROPE, WHEN THE
USTBOND STRUCTURE IS BROKEN, A WEIMAR CREATION,
WHOSE DEFENSE WILL LEAD TO ADDITIONAL MAJOR
LOSSES. $$$

A
qualification, as Rob Kirby has several years
of bond desk experience. On the job a decade
ago, he revealed and embarrassed Canadian
bankers who were unaware that Interest Rate
Swaps contain an actual bond created to form
demand on the other end. The other side is
a bond built from artificial demand. As a
result of his work and exposure for the wobbly
element of IRSwaps, the Canadian shops were
shut down by Wall Street, much like a renegade
is cut off. Rob Kirby knows the bond market,
knows the derivative market, knows the supporting
structures behind the walls, and is a great
financial forensic analyst. He wrote a sequence
of rebuttals to knock down the complete falsehoods
propagated by JPMorgan and their criminal
executive team.

"Regardless of what the mainstream press and Jamie
Dimon are saying, I do not believe them. Remember
last month Blythe Masters told CNBC that the
JPMorgan derivatives book was customer driven.
That was a complete lie and misdirection too.
It amazes me to this day that nobody in the
analyst community asks why the JPMorgan derivatives
book is $80 trillion in notional, when by
their own admission in Call Reports to the
OCC, there are virtually zero customers for
any of this garbage."The derivative book is to manage
the entire interest rate structure at 0%,
to control the gold & silver market, to
enforce the supremacy of the USDollar. Never
does a big bank hedge against its entire customer
positions, a pure deception. JPMorgan finds
itself in an awkward position since it forms
several important markets. JPM is the market,
which enables rigging. In the case of the
Interest Rate Swap, they have no counter-party
in USTBonds. Instead, they manage the 0% official
rate against the heavy weight of annual $1.5
trillion debt security issuance. The Supply
& Demand equation is thus suspended, as
in zero gravity.

"If credit conditions in Europe had really changed
enough to create the adverse situation described,
this would have been reflected in a much bigger
move in European government bond yields, much
higher. This has not happened. In fact, over
the six-week time period in question, the
Greek 10-year yields have almost been cut
in half, from 35% to 20% roughly. The French
10-year yields went from 3.0% to 2.8%, and
Italian 10-year yields have oscillated between
5.0% and recently up to 5.5%. This is a USTreasury
bond story."
The JPM excuse laid out on the last six weeks
does not stand up against the simple data.
The turmoil in European sovereign bonds is
not there, not sufficient to cause $2 to $3
billion in losses. Yet few bank analysts even
notice the obvious deception. They prefer
to place blame on Europe, thus deflecting
attention away from the equally broken US
bond market and their own client investments
in the US markets. The USDollar supposed strength
is also directly related to Euro currency
weakness. Both currency sides are equally
weak, wobbly, broken, and volatile.

"JPMorgan's customer is the USTreasury, in particular
the Exchange Stabilization Fund (ESF), which
executes their orders through the New York
Fed trading desk. The ESF is above oversight
from anyone or anything, including the USCongress.
The OCC tells us that at December 31/2011:
'81% OF ALL OUTSTANDING NOTIONALS ARE INTEREST
RATE PRODUCTS, WITH SWAPS BEING A MAJOR CONSTITUENT,
6% OF OUTSTANDING NOTIONALS ARE CREDIT DEFAULT
SWAPS.' The 10-year USGovt bond is a respectable
proxy for the interest rate portion of Morgan's
derivatives book. In the past eight weeks,
the 10-year bond has gone from 1.90% to 2.40%
and back to 1.80%. In trading parlance this
is called a WhipSaw, 25% up followed by a
steep 25 % down. I do not believe that
Morgan was caught in sudden one-way move on
credit spreads, since they are the market.
WhipSaws are where big trading houses have
historically had their biggest losses. I suspect
this problem is systemic and we should soon
learn that it has affected Citigroup, Bank
of America, Morgan Stanley, and Goldman Sachs
too. I expect all these other shady institutions
to lie about the source of their losses too."

The
finger is directly pointed at USTreasury Bonds,
which have experienced dangerous volatility
with little attention noted. The massive Interest
Rate Swap complex with its heavy leverage
cannot easily manage such a disruptive storm
without loss. Imagine a 200-story tower with
inadequate foundation in the midst of high
winds. The Euro bond story is false. The USTBond
story is more credible. In no way does JPM
or the USFed wish to bring attention to the
IRSwaps, the ZIRP, or the gaping USGovt deficits.
They are defying gravity and lying boldly.
Hidden also are needs by Fannie Mae to keep
a lid on interest rates, their mountain of
mortgage bonds another asset bubble adopted
by the USGovt. Hidden still are the needs
by AIG to keep a lid on derivatives, in the
unregulated toxic swill arena.

◄$$$
THE INVESTMENT COMMUNITY AND EDITORIAL ARENA
HAS PITCHED MANY OPINIONS. THEY SCREAM OF
DISTRUST OF JPMORGAN AND THE BROKEN SYSTEM.
WHALEN IMPLIES THAT THE JPMORGAN SHOP IS SUFFERING
FROM REORGANIZATION AND MIGHT BE LOSING CONTROL,
AS IT REACTS TO THE VOLCKER RULE. THE VAST
BOOK CANNOT BE MANAGED IN A CLEAN MANNER,
TOO COMPLEX, TOO LARGE, IN A WORLD SUBJECT
TO TOO MANY CONTROLLED MARKETS. THE APPARATUS
IS BREAKING DOWN IN ACCELERATED SPEED. $$$

Chris
Whalen is one of my favorite bank analysts.
He is co-founder of Institutional Risk Analytics
and works at Tangent Capital Partners. His
bank analysis is usually very solid and expert
with unusual excellent insights. He has recently
challenged Wall Street behavior to the point
of inciting retribution. He had some thoughts
on the JPMorgan loss incident. He said the
following during a CNBC interview. Before
long, he will not be welcome on their news
show due to his honest critical commentary.

"Not surprised by the size of the loss or source.
You cannot be consistently right when you
trade derivatives. There are times when the
relationships you think exist are badly wrong,
with disastrous results. But I wonder how
much Dodd-Frank [financial regulatory overhaul],
and the Volcker Rule [limiting proprietary
trading] contributed to this outcome. Lot
of change underway inside JPM. The irony
here is that the media and investors alike
have attributed magical, superhuman powers
to Jamie Dimon and his colleagues. But JPM
is like everyone else, just a partial monopoly.
The interesting thing though is to see them
screw up in structured products. Again, given
the risks the bank takes, one should not be
at all surprised to see this type of event.
It just shows how volatile and unpredictable
is the investment side of the house. The other
point is that these losses by JPM are entirely
a function of the way that exotic derivatives
work, for which there is no cash basis (like
oil or gold) to create risk that would not
otherwise exist. The losses by JPM are indeed
self-inflicted as Dimon said, and entirely
speculative.

Over the past couple of weeks, we have been hearing of
a change of direction for the CIO group
at JPM. As I noted here, dozens of people
have been let go from this area in the past
six months due to the Volcker Rule. The
media does not comprehend this part of the
story for some reason. The JPM CIO area had
traditionally positioned the book to make
money in volatile markets, but net short to
align with the net long book of the CIO in
JPM's vast securities portfolio. Press
reports recently have claimed that JPM was
shifting the trading book run by 'The Whale'
[Iksil] in London to a net long position.
If so, then JPM obviously would not be hedging
the portfolio anymore, and would actually
be increasing the overall risk of the group.
Not only would this put them at risk for a
big loss, but if The Whale's activity was
not a hedge anymore, and rather trading risk,
then it is not clear that this activity would
be permitted under Volcker. Press reports
on JPM and The Whale badly underestimate the
impact of the Volcker rule on the trading
operations of the large banks. But Jaimie
Dimon seems to have handed his head to Chairman
Volcker and the advocates of regulation with
this error."

A
colleague named George from Chicago has extensive
experience in the commodity and bond pits.
His comments are paraphrased. Each basis point
in the JPMorgan CDSwap costs them $200 billion.
It just rose 7 bpts to mean $1.4 trillion.
They have an $80 trillion derivative book
wrapped endlessly amongst a handful of entities.
Ever since 2008, the banks have not been so
much under-capitalized, but rather very much
catastrophically broke. At least $20 trillion
later in USFed dispensations, and they are
more broke. Imagine a broken Daisy Chain or
a Japanese nuclear reactor as water levels
fall. All the synthetic bond creations are
blowing up. They are all highly illiquid entities
with no market, no end buyer, designed to
hold together the entire system with its artificial
pricing. He said, "JPMorgan will be
one of the major nexus points where the Daisy
Chain of derivatives cross (blows up) time
and time again. The networked chain in off-exchange
derivatives has entered its destructive sequence.
All the primary banks in the US and Western
Europe are now heavily intertwined with USFed
off-balance sheet manure [toxic paper]."
What a great relevant image of a nuclear reactor
losing its water cooling to describe the Western
financial structures, from bonds to currencies
to bank capital. The JPM tank is running out
of water.

Some
excellent articles are worth checking into.
For a good layout of many details on how the
world's largest proprietary desk is in the
process of going bust, see the Zero Hedge
article (CLICK HERE).
The details are mind numbing and will make
your head spin, more proof that the US financial
sector does not add value to the global economy,
but rather sucks capital from it. The Iksil
trades became more momentum trades than hedges.
JPM was burned. For a good description of
the inner workings of the haywire structured
finance mess, see the Zero Hedge article (CLICK
HERE).
Jesse provides a brief indictment of JPM as
a rogue element that distorts and controls
numerous markets. He openly wonders if a major
scandal will ensue with JPM at the center,
bigger than Enron and Lincoln Savings and
Madoff combined. See the Cafe Americain article
on numbers too big at last (CLICK HERE).

More
information on The Whale Bruno Iksil can be
seen as he drives prices every which way in
reckless exercises as gigantic unregulated
markets are moved in pursuit of generated
private profit at market expense. The Whale
has been beached but will remain marauding
the waters. See another Cafe Americain background
article (CLICK HERE)
and a mainstream expose by the Wall Street
Journal (CLICK HERE).
See the Globe & Mail article on the fallout
from three executives involved in the trading
loss leaving the criminal firm (CLICK HERE).
The exodus is soon to pick up speed, from
both scapegoats and guilty parties, followed
by those who wish to avoid being caught professionally
in a storm not of their making, or a storm
they had been ignorant of until recent months
led to an awakening. Witness the Quickening
of JPMorgan, a death process, a Zombie transformation,
a Weimar broken clutch.

Lastly,
hardly of least importance, the JPMorgan fortress
is under attack by the Lilliputians. The past
is catching up to them, as defrauded mortgage
bond investors seek redress and remedy. The
assumption of the Bear Stearns credit portfolio
contained mountains of unresolved mortgage
assets. The lawsuits are piling up. JPM decided
to raid its Loss Loan Reserves in order to
show nice quarterly profits above expectations.
They did set aside some cash for litigation,
but not nearly enough. This story will not
go away. JPM has filed a Wells Notice as lawsuit
claims have been made on $120 billion in assumed
securities of various ugly types. See the
Teri Buhl article (CLICK HERE).

◄$$$
SIMON JOHNSON OFFERS A HARSH CRITIQUE OF THE
FINANCIAL SYSTEM AND SUGGESTS C.E.O. DIMON
SHOULD RESIGN. HIS CRITICISM IS DIRECTED AT
REGULATORY FAILURE, EXCESSIVE LEVERAGE, AND
ABSURD STRESS TESTS. HE STRIKES AT POOR THOUGHT
ON BANK CAPITAL MANAGEMENT AND BANKER INCEST.
$$$

Simon
Johnson is a British American economist. His
current role is Professor of Entrepreneurship
at the MIT Sloan Business School and a senior
fellow at the Peterson Institute for Intl
Economics. He believes the JPMorgan failure
highlights the incompetence of the USFed as
regulator, and even a corrupted USGovt. Here
are several main points made by Johnson. See
the Baseline Scenario article (CLICK HERE).

The USFed capital standards oversight did not protect
from the failure, called a manageable error.
Even the USCongress is linked, from bullies
linked to Wall Street. Debate over proprietary
trading misses the point of a group of banks
engaged in dangerous leverage and market
control practices.

The side effects of the continuing campaign by the
bank lobby group have been to weaken reform,
assuring the string of events within the
interminable financial crisis. The bankers
wish to reduce equity levels and run a more
highly leveraged business, with even
more debt relative to equity, more derivatives
atop that equity. What insanity!

The JPM loss was no hedge at all, but a thinly
disguised attempt to circumvent the curbs
on proprietary trading. They repeat
the same activity on a much larger scale
in other markets and on other continents.

Experienced Wall Street executives and traders have
claimed that risk management has become
more sophisticated, in keeping with the
expertise shown by CEO Jamie Dimon. If the
best of Wall Street suffers breakdown, prepare
for the rest of the Wall Street firm losses.

The real losers in this turn of events are the USFed
Board of Governors and the New York Fed,
whose approach to bank capital is demonstrated
as deeply flawed.

In the spring, JPMorgan passed the latest USFed stress
tests with flying colors.
The Fed agreed to let JPMorgan increase
its dividend and buy back shares, both of
which reduce equity on the books. Amazingly,
despite the stated loss, Dimon indicated
the stock buybacks will continue. For JPMorgan
to have incurred such losses at such a relatively
mild part of the credit cycle is simply
stunning. (But he ignores the WhipSaw in
USTreasurys during March.)

Such banks have become too large and complex for
management to control. The breakdown
in internal governance is profound.
The breakdown in external corporate governance
is also complete. Do not expect Wall Street
bank executives to resign.

The SAFE Banking Act is being re-introduced in the
US Senate. The opposition to the Too Big
To Fail mantra of syndicate continuance
is led by FDIC head Sheila Bair, along with
Fed Governors Richard Fisher and Tom Hoenig,
who have been right all along.

The people in charge of Federal Reserve policy in
this regard are dead wrong about bank capital
concepts. They spend too much time talking
to Jamie Dimon and other Wall Street executives,
while consistently refusing to engage with
better informed critics. The club is too
busy with incestuous gatherings.

Banks need higher capital requirements and much simpler
rules that limit leverage. Big banks should
be forced to become smaller, simple enough
to fail.

## GLOBAL TRADE REVOLT INTENSIFIES

◄$$$
A TRADE SETTLEMENT SYSTEM IS BEING DEVISED
WITH ACTUAL DEVICES BEING CONSTRUCTED. THE
MOVEMENT IS LED BY CHINA, IN RESPONSE TO ABUSES
USING THE S.W.I.F.T. TRANSACTION SYSTEM AS
A WEAPON. THE ALTERNATIVE SETTLEMENT SYSTEM
WILL HAVE A GOLD VEHICLE, BE ENTIRELY DECENTRALIZED
IN ITS USAGE. A MORE FULL DESCRIPTION IS NOT
POSSIBLE RIGHT NOW. $$$

The
wrong-footed abuse centered on SWIFT bank
transaction as a retaliatory method against
nations which conduct trade with Iran has
resulted in broad counter-measures. The alternative
trade settlement system is taking shape. Confidential
word has come that Gold will be part of the
solution, as part of a transaction vehicle
that could become part of banking systems,
perhaps only in overnight or short-term transactions.
It will not be part of any actual barter program
or platform, which is a totally separate matter.
The barter program itself will also have a
Gold core to handle the short-term funding
requirements. The movement away from US$
in trade settlement is led by China. In
general the Eastern nations are pursuing a
path whereby trade settlement is no longer
centered on the USDollar. A preferred method
in a decentralized application is the plan.
Indications are that the Eastern-led alternative
will have a primary gold vehicle. The details
cannot be described more fully at this time,
but one should anticipate a type of financial
vehicle for trade facilitation that could
supplant the need entirely for the USDollar
in payment settlements. Trade partners
would be required to use the new vehicle,
and thus not store USTreasury Bonds in such
extreme volume. Witness the removal of the
USDollar as the core for global trade settlement.
The vehicle is taking shape. The details will
be forthcoming.

The
trade settlement itself is not a new SWIFT
system, but something more radically different,
on a path to unseat the USDollar from its
trade settlement primary post and to remove
the central office channels and gateways.
A key element to the new system will be
its decentralized function, enabling business
to be conducted far from the monolithic system
bound within the US$ structures currently.
Imagine a trade deal consummated and settled,
done on a few BlackBerry devices by several
parties standing in four different countries,
with no connection to the US$ mills, bank
centers, and marbled offices, far removed
from the highly destructive Exchange Stabilization
Fund and its war room management. Details
on the gold vehicle will be shared when made
available, and the green light given for full
disclosure. Only rough sketches have been
provided, with bits of detail. The entire
process is in development. Risk level is high.
The potential for retaliation by the USGovt
with its full arsenal is acute.

The
USDollar enjoys its position as global reserve
currency still, but the winds are changing,
to send the US ship of state to derelict waters.
The global currency entails two important
functions, usage in bank reserve systems and
usage in trade settlement. As the Eastern
nations embark on more trade settlement outside
the USDollar sphere, the practical need for
continued reliance upon the USDollar in banking
systems will be obviated, removed, and eliminated.
Entire national banking systems will not seek
an alternative to the USDollar unless and
until trade is no longer settled primarily
in US$ terms. That supplanting process is
accelerating. Nations will store fewer US$-based
bonds in their banking centers, if trade does
not require them in exclusive manner for settlement.
They will store to some extent the new financial
vehicles designed for trade usage, especially
in short-term functions. The money changers
and their tables are being turned upside down
in a highly disruptive step by step process.
The end result will be the USDollar losing
its privileged global reserve currency status,
the USEconomy being forced to bid up other
currencies to import crude and finished products,
and the United States as a nation no longer
being capable of spending printed or credit
card extended money like a drunken spoiled
jobless rich kid who sports a bad narcotics
habit.

◄$$$
UPCOMING SUMMITS WILL BE INTERESTING TO OBSERVE
FOR CONTRAST. THE G-20 WILL BE AN IMPORTANT
PLANNING STAGE EVENT, WHILE THE G-8 WILL BE
A BACKWATER GRIPING AFFAIR. THE FORMER WILL
DETERMINE THE GLOBAL NEW PATHS, WHILE THE
FORMER WILL CONTEND WITH COLLAPSE OF THE FINANCIAL
STRUCTURES. THE CONTROL HAS SEEN A TRANSITION
TO THE G-20 VESSEL AND THE B.R.I.C. FRONT
HELM. $$$

The
upcoming G-20 Mexico Summit will be the seventh
meeting of the G-20 heads of government. It
will be held in Los Cabos at the Baja tip
of California on June 18th and 19th. The convening
of the G-8 summit is to be held at Camp David
Maryland in the United States on May 18th
and 19th. The G-8 Meeting will occur alongside
the NATO summit. It is expected to generate
an unusual amount of attention. NATO must
contend with the Russian saber rattling over
the Eastern Europe missile opposition. Putin
has threatened to remove the emplaced missiles,
which have little defensive purpose and have
irritated Russia for a full decade. They stand
in violation of past treaties. Perhaps it
is finally time for the NATO nations to object
to US behavior, including the airbase abuse
in narcotics trafficking. President Vladimir
Putin decided not to attend the G-8 Meeting,
an insult to the industrialized nation leaders.
He must realize its declining importance.
He will probably send an emissary to Los Cabos.

The BRIC nations might use the June G-20 Summit to announce
their alternatives for trade settlement, for
new reserve currencies, and for SWIFT bank
transactions.
If so, it would be a blockbuster conference.
Maybe the USGovt can release at the gathering
a pack of virus strewn locusts, a specialty,
or a swine flu as done at the Mexico City
summit in 2009 attended by the Obama entourrage.
Expect Treasury Secy Tim Geithner to use the
May G-8 Summit to rally support against any
G-20 initiatives presented in June. Expect
Tiny Tim to find deaf ears. But the industrialized
nations are hip deep in sovereign bond collapse
with all the messy consequences that come
from broken financial platforms, endless skeins
of futile bailouts, and the recent populist
uprising to bring an end to austerity poison
pill applications. Do not expect the G-8 to
be anything more than frustrated rhetoric
to an empty audience by a bunch of men who
used to control the great flagship at sea,
but ran it aground much like the Italian cruise
liner Costa Concordia. The USTreasury Bond
ship is lying on its side, pumped frantically,
but not so visible to the untrained eye. In
its wake lies financial effluent of the most
destructive variety (derivatives), combined
with recklessly strewn fuel (USDollars &
Euros & BPounds). The effluent kills capital,
while the fuel could ignite to cause a powerful
display of price inflation.

◄$$$
IRAN IS ACCEPTING RENMINBI FOR SOME OF THE
CRUDE OIL IT SUPPLIES TO CHINA. THE MOVEMENT
AWAY FROM US$-BASED TRADE SETTLEMENT IS GAINING
MOMENTUM, THE PRIMARY ARENA BEING CRUDE OIL.
WITH CHINA DOMINATING TRADE BOTH IN EXPORT
AND IMPORT, EXPECT MORE CHINESE YUAN TO BE
CENTRAL IN THE TRADE FLOW. EXPECT MORE BARTER
DEALS TO BE CONSUMMATED AS THE USDOLLAR IS
AVOIDED. GREAT RESENTMENT HAS COME AGAINST
HARSH USGOVT ACTIONS. $$$

At
the current moment, the Chinese Yuan is not
fully convertible. Its ample supply is made
available from several bilateral swap facilities
that act much like formal barter. Industry
executives in Beijing and Kuwait, as well
as bankers based in Dubai confirm the usage
of Chinese currency in oil trade settlement.
The motive for its usage extends from the
controversial USGovt sanctions aimed at Tehran.
The nuclear program is a straw dog issue,
whereas the non-US$ crude oil sales are at
the heart of the conflict. Tehran is spending
the currency on goods and services imported
from China. Most of the crude oil in tankers
that head from Iran to China is handled by
the Unipec trading arm of Sinopec and through
another trading company called Zhuhai Zhenrong.
See the Financial Times article (CLICK HERE).

The Chinese Yuan accepted by Iran as a settlement currency
for its oil trade with China poses a significant
threat to the dominance of the USDollar as
the global trade currency. China could be imitated. The movement
is gaining momentum, to the dismay of the
USGovt officials. The various barter deals
also sidestep the USDollar in trade, as bilateral
swap facilities push the usage of the Chinese
Yuan in other channels. Some barter is underway
between Iran and China, whose Zhuhai Zhenrong
oil trading company provides services such
as drilling to Iran in exchange of crude oil.
Increasing US sanctions have put strain on
Iran, reducing its oil revenues, and causing
a fall in the local Rial currency that has
resulted in a price inflation surge. The sanctions
are more widely recognized as backfiring against
USGovt ministries. Several countries have
embarked on usage of their own currencies
instead of the USDollar for oil trades. In
a recently announced deal, India and Iran
have agreed on India paying 40% of its oil
imports in the form of Indian Rupee, the remainder
set up as credits for Iran to purchase goods
and services from India. Also China has joined
India in a similar barter deal with Iran.
The pattern has begun. Devices in bilateral
best interest are being pursued, in avoidance
of the USDollar with all the heavy handed
strictures, fraudridden mortgage bonds, risk-filled
bubbly USTBonds, and oversued financial weapons
deployed. Global resentment adds to the motive
to seek non-US$ solutions in trade. See the
Commodity Online article (CLICK HERE).

◄$$$
LOOK FOR A REVITALIZED EURO CURRENCY MADE
CLEAR IN A TRIM SOLID CURRENCY AFTER REMOVAL
OF THE TOXIC SOUTHERN LIMBS. THE POST-PIIGS
EURO WILL HAVE A GERMAN CORE. THE OPPORTUNITY
WILL SOON ARISE FOR THE ARRIVAL OF A SET OF
GOLD-BACKED NEW CURRENCIES. $$$

Four
main potential currencies (Euro Mark, Russian
Ruble, Chinese Yuan, Gulf Dinar) would force
the United States, Great Britain, and sick
parts of Southern Europe to bid up the four
new strong currencies. The USDollar is soon
not to be the central focal point of global
trade. Immediate consequences are coming for
those nations not participating in new global
trade core, where critical mass might be suddenly
achieved to upset the global financial structure.
Their banking systems will have much less
inducement or need to store US$-based bonds.
Deadly Weimar consequences of USTBonds being
fully dependent upon the USFed printing press
have already been felt for at least a full
year. Main street price inflation is coming
to the USEconomy and Western Europe, global
trade areas outside the newly planned systems
soon to be launched out of crisis in expedience.
The United States has profound import dependence,
with over 50% of debt held by foreign creditors.
Look for the US & UK & Western
Europe to become the heart of the new industrialized
Third World, as they must acquire the new
currencies. The most significant consequence
will be that the USDollar will decline badly
enough to cause severe problems in the USEconomy.
The clowns who shout about USDollar dominance
are going to be silenced. Gold will be the
center of the new systems that displace the
US$ structure that are collapsing. Its price
will be multiples higher.

## DEADLY CENTRAL BANK POLICY

◄$$$
THE MYTH OF ALAN GREENSPAN IS BEING EXPOSED.
HIS TRUE SIDE AS A RECKLESS INFLATION ENGINEER
HAS BEEN MADE PLAIN. HE PRESIDED OVER THE
GREATEST ASSET BUBBLE EXPERIMENT IN US-HISTORY
WITH A GUARANTEED SYSTEMIC FAILURE AND DEBT
DEFAULT. $$$

The
ex-chairman should have his knighthood stripped.
The myopic garbled Sir Alan Greenspan has
been followed by the Weimar champion and revisionist
history expert on the great depression. The
Bernanke handiwork is proving that ample liquidity
indeed solves nothing, contrary to his wondrous
academic treatises of pure dross, earning
his acclaim. The Bernanke Fed attempts to
dampen price inflation by reducing final demand,
as it slowly kills the USEconomy. Sir Alan
Greenspan is a name of mockery used by the
Jackass. He was nothing but a double agent
working for Swiss castle dwellers who earned
two paychecks. His hidden mission was to give
Americans what they wanted so that they would
destroy themselves, weaken the USDollar, and
bring out global financial chaos. The masters
with ascots and snifters would usher in central
fascism during the crisis storms. His tools
were easy money and accepted false economic
statistics. His language was undeciperable,
and therefore respected by fools and professionals
alike. See the Cafe Americain article (CLICK
HERE).

The
Bernanke Fed has always arrived late to the
scene, after incorrectly urging calm and assuring
of containment of burgeoning crisis, later
to erupt into a horrendous mess. Expect a
collapse from the crippled situation that
has been in progress without potential remedy
for four full years. It seems the USFed prefers
to come late to the rescue, probably so that
the big banks can sell their assets at more
favorable prices. After all, the US Federal
Reserve works on behalf of the elite class
of bankers and masters of the universe. The
USFed continues to work an agenda that smacks
of disaster, as they attempt to dampen final
demand. Their goal is price containment, but
on the demand side. On the other side
of the equation, their relentless monetary
expansion and bond purchases result in ugly
monetary debasement seen directly in higher
commodity and energy prices. So the USFed
is using a strategy to kill the USEconomy
in order to contain price inflation. This
is the worst possible example of central bank
leadership in modern history, probably all
of history. Yet Bernanke is admired within
the financial community of paper merchants.
Policy causes profound economic damage to
curtail end demand without halting their pressure
for higher cost structure. As they debase
money, costs rise and capital is destroyed
as it is taken out of production, often liquidated.
When the monetarist firemen arrive late to
apply fire hose liquidity, they render damage
in every step of the way, lastly with water
damage. The global economy on the Western
side is being permanently wrecked, sure to
affect the more vibrant Eastern side. The
myth of brilliance possessed by Greenspan
is being seen as a last hurrah, a blowoff
top. Next comes systemic failure. He will
be seen as the goat.

◄$$$
THE L.T.R.O. SOLUTION DESIGNED BY DRAGHI IS
FAILING IN FULL VIEW. THE NEW DEVICE IS DISTRUSTED.
IT HAS RESULTED IN SUDDEN LOSSES TO BIG EUROPEAN
BANKS THAT FIND THEMSELVES STRUGGLING WITH
NASTY ILLIQUIDITY PROBLEMS. THE DRAGHI TOOL
DID NOT PATCH UP THE BIG BANKS, BUT RATHER
POKED ENORMOUS ADDITIONAL HOLES IN THEM. THE
EURO BANKS ARE RUNNING OUT OF VIABLE ASSETS,
GRAND INSOLVENT HOLLOW PILLARS. THE USFED
AND EURO-CB ARE LOADED WITH TOXIC SWILL JUNK
PAPER. $$$

The big European banks are being branded with a stigma
for participating in the reckless LTRO funding
programs. What a perverse development. They
are a disaster and signify a major blunder
by Draghi right out of the starting gate as
head of the Euro Central Bank. The Long-Term
Refinance Operation funds went directly to
purchase Spanish and Italian Govt Bonds, and
are fast on negative ground. They have put
the banks that tapped the funds into a vulnerable
position. The bond market has chosen to stigmatize
those banks involved. Since mid-January,
when the failure of the LTRO became more evident,
the banks with fund usage have been given
a higher bond yield assignment as punishment.
The market place has no mercy. Application
of Southern Comfort and Jack Daniels harmed
the alcoholic patient further, hardly a surprise.
Unlike the QE bond purchases in the United
States, which have no meter for failure, since
the USTreasury market is controlled with a
semi-tight fist, the Euro bank bonds respond
to real market forces. The Euro banks are
beneficiaries to the Dollar Swap Facility
laid out for their usage, dispensing nearly
free USDollars to handle their troubled portfolios.
It has backfired on Draghi.

The
Zero Hedge staff is solid and expert, a crack
team on top of the situation, first to point
out numerous nasty effects. They noticed the
stigma for banks that took LTRO funds, by
comparing corporate bond yields for the group
versus those not taking the LTRO funds. One
could argue that no control group is in place,
that the LTRO banks were weaker to begin with,
pushed by the urgent need to participate in
patching up the problem. But they abused the
funds by purchasing sovereign bonds after
they had been discounted by heavy bond monetization
at the hands of the Euro Central Bank. As
bond yields have risen from the hollow solution,
the LTRO banks are on the hook, in negative
ground, and very vulnerable. Nothing was
fixed. The Zero Hedge team has embarrassed
Draghi, a hack from Goldman Sachs who brings
no solutions, only more disguised debt instruments
that solve nothing. Like a better brand of
Chivas Regal whisky for the alcoholic, it
will fix nothing.

The so-called Stigma bond spread between LTRO and non-LTRO
banks jumped notably in recent weeks, the spread higher than anytime in the last two weeks,
at over 160 basis points, and its highest
in almost six months. A new major challenge
has arisen for the EuroCB to manage. The banks
that need additional LTRO funding have no
more performing collateral to pledge. Worse,
other banks that would like liquidity will
not accept ECB funds, since they better understand
the encumbrance and consequent stigma attached,
like vassal servitude. The ECB is left without
viable tools to offer. Upcoming and soon is
more direct bond monetization, the scourge
of central bankdom. It is pure monetary hyper
inflation of the most egregious variety. It
is the last resort of the failed central bank
franchise system defenders. The vicious circles
are ramping up in Europe once more. The LTRO
benefit is nil, turned into a stench with
a stigma. More money poorly spent, recklessly
tossed into the mix. The central banks are
failing and flailing in full view.

Tyler
Durden repeats his dire assessment from two
months ago, "When one understands
that the heart of Europe's problem is the
rapid vaporization of all money good assets,
everything falls into place, from the ECB's
response, to Europe's propensity for infinite
re-hypothecation, to the rapidly deteriorating
financial system." The European
banking system is soon to run dry of viable
assets. No collateral will be left available.
The continent will then resort to pure bond
monetization, the ultimate scourge. The USFed
will come to their rescue again with another
round of Dollar Swap Facility easy money.
It is just hyper monetary inflation of a different
stripe, having passed under the Atlantic.
The USFed and EuroCB have one trait in common,
both have toxic balance sheets. Also, neither
central bank will dare initiate margin calls
on the dross assets held as collateral, for
fear of causing a panic if not a meltdown.
See the Zero Hedge article (CLICK HERE).
The USFed and EuroCB are killing all assets
in Europe.

◄$$$
THE L.I.B.O.R. RATE BY BANK REVEALS THE STRESS
ON INDIVIDUAL BANKS, WHICH HAVE NEED FOR USDOLLARS.
THE HIGHER THE RATE, THE MOST DESPERATE THE
BANK AND THE CLOSER TO FAILURE. NOTICE THE
FRENCH BANKS LEAD THE PACK IN HIGH SWAP LINE
RATES. THE FRENCH BANKS ARE IN ALL LIKELIHOOD
LOSING THEIR GOLD RESERVES DURING PAINFUL
MARGIN CALLS, TAKEN BY FORCE. $$$

Since last summer, the big European banks have shown within
the currency swap market their rising stress
levels. The alarms are ringing
as market mavens and bank analysts observe
the deteriorating conditions. They require
USDollars to satisfy debts, taken from the
easy money lines at the USFed. That funding
has backfired also. Three things are occurring
in European liquidity markets that should
worry the big banks and their investors. 1)
The 3-month LIBOR is waking up again after
issuing red light warnings at the turn of
the new year. 2) The flagship Deutsche Bank
has attracted unwanted attention in recent
upticks for 3-month LIBOR. They join UBS as
the only other bank to raise its willing offer
rate within the LIBOR family. They need the
short-term liquidity. 3) The 3-month EUR-USD
basis swaps that enable USDollar funding have
exploded with their biggest deterioration
in five months. Big banks are pushing up the
premium they are willing to pay to receive
USD over EUR in an open display of desperation.

Newly
appointed Euro Central Bank head Mario Draghi
seems slow afoot in recognizing the nasty
outcome to his lame inept solution. He optimistically
expects to see the beneficial effects of the
Long-Term Refinance Operations, as it filters
through to the real economy. Once more, he
is incorrect as banks are now desperately
seeking liquidity (USD-based in this case)
with short-term swaps. He fails to comprehend
that new bond paper to replace old toxic bond
paper still have the same sick roots in vacuous
collateral. Conditions in LIBOR have grown
worse. The new wrinkle is how the 3-month
EUR-USD basis swaps have just snapped.
The big European banks are reverting back
into funding crisis mode. The lesson learned
is obvious, but not to the central bankers
who have exhausted solutions with empty toolbags.
No LTRO funds can save the day, especially
in Spain. No collateral remains to pledge,
as the rot permeates the banking system. Expect
the highly undesirable solution to be ordered,
a direct ECB monetization, in an early stage
to bank recapitalization. See the Zero Hedge
article (CLICK HERE).

Based
on LIBOR rates, one can deduce that Societe
Generale, BNP Paribus, and Credit Agricole
have the worst acute problems. They are known
to be in possession of very large Greek sovereign
debt exposures. The natural consequence, in
the midst of gold pressures by the Eastern
Coalition, would be for the big French banks
to suffer massive loss of their gold reserves,
liquidated to support their sovereign debt
margin calls. This hypothesis awaits confirmation.
Be sure to know that securing USDollars
via the swap lines lifts the USDollar, depresses
the Euro, and harms the gold price. It
is backdoor US$ demand to stave off ruin.
The paradoxical mix occurred also in 2009,
but quickly turned positive for gold. It will
again, but with more volatility.

◄$$$
THE USFED APPROVED HOLDING COMPANY APPLICATIONS
FOR THREE CHINESE BANKS. SOMETHING IS BREWING,
POSSIBLY A MAJOR STAKE BOUGHT IN TEETERING
BROKEN BIG US-BANKS, BY THE CHINESE. WITNESS
THE POSSIBLE BEGINNING OF CHINESE EXPANSION
IN THE UNITED STATES, AS VIABLE STRONG LENDERS.
THE USFED HAS APPROVED THE PATH FOR THE FIRST
CHINESE TAKEOVER OF A BANK CHAIN IN THE UNITED
STATES. JUST WHEN DEBATE WAS STARTING UP,
THE CHINESE ANNOUNCED A TAKEOVER OF A HONG-KONG
BASED BANK WITH BRANCHES IN CALIFORNIA AND
NEW YORK. THE USGOVT HAS MADE NICE WITH THE
CHINESE, CUTTING BACK ON HOSTILITIES. $$$

Be
sure that the Chinese have threatened the
American bankers and their tools in political
office. Something very big is happening as
the USFed has approved bank holding applications
for three major Chinese Banks. Some speculate
that some of these banks could be primed to
acquire some US big banks. Perhaps in a
certain climax of events, under the right
circumstances, using measured political leverage
with their vast USTBond holdings, China might
pull off a purchased stake in the big US insolvent
banks. In the meantime, the opening salvo
is to grab a bank with Hong Kong roots but
branches on the two US coasts. Check out the
formal announcement for Industrial & Commercial
Bank of China, the Agricultural Bank of China,
and the Bank of China (CLICK HERE,
HERE,
HERE).
These are branch licenses, not primary dealer
licenses.

Colleague
Craig McC in California closely monitors the
story. He wrote, "With a bank holding
company the Chinese can now easily recycle
USTBonds into shares in US or foreign companies
traded on any US exchange. They could also
invest heavily in gold and silver funds such
as Sprott, tech companies, and others. They
could even buy non-traded assets such as agricultural
land. The Chinese will no longer be blocked
from buying companies like Unocal like they
were 3-5 years ago." The times have
changed, since China has become the largest
USTBond creditor. It can call the shots. See
the Keystone Oil pipeline, where it appears
that Athabasca oil from Canadian oil sands
is to be directed to China, and not the American
heartland. In fact, up to 35% to 40% of Canadian
mineral and resource output that leaves the
Vancouver port is directed to China, which
owns the port.

ICBC
is China's largest bank. History has been
made, when the USGovt approved a takeover
of a US bank by a Chinese state controlled
company. Immediately following high-level
US-China economic talks in Beijing, the US
Federal Reserve approved an application from
Industrial & Commercial Bank of China
to buy a majority stake in the US subsidiary
of Bank of East Asia. The giant ICBC will
pay $140 million to buy an 80% interest in
Bank of East Asia USA. The transaction will
make ICBC the first Chinese bank to acquire
retail bank branches in the United States.
For some time, ICBC has been the most aggressive
of the big four Chinese banks to expand overseas.
According to the USFed, the Chinese giant
bank has total assets of about $2.5 trillion.
The path is clear to buy up to 80% of the
US unit of the Hong Kong-based Bank of East
Asia, which operates 13 branches in New York
and California. As part of the deal, ICBC,
the China Investment Corporation (CIC), and
Central Huijin Investment will each be recognized
as bank holding companies, subject to US commercial
bank regulations.

Supposedly,
a reciprocal agreement has been forged, whereby
reforms have enabled an open door to the lucrative
Chinese financial sector for US firms. After
the conclusion of meetings on May 4th, the
USDept Treasury stated that China had made
encouraging progress on reforms, including
steps toward a more open and market oriented
financial system. (Try not to laugh or
puke.) Without any doubt in the Jackass mind,
the Chinese threatened to dump USTreasury
Bonds, and complied in minor ways toward apparent
reform, the pressure applied privately. The
USGovt is extraordinarily vulnerable and in
no position to bargain, fast losing its sovereignty
via external debt. Although the footprint
by ICBC is small within the US financial sector,
the door is opened for further maneuvers and
acquisitions, including small minority stakes
in the largest Wall Street banks, plus the
important satellite banks like Wells Fargo
and Bank of America. The volume is indeed
small. The Bank of East Asia comprises under
1% of New York City bank deposits. By the
way, CIC already owns a non-controlling stake
in Morgan Stanley. In other USFed board decisions,
Bank of China won approval to acquire a branch
under its name in Chicago. Bank of China operates
two insured federal branches in New York City
and an uninsured branch in Los Angeles. Agricultural
Bank of China is almost ready to establish
a branch in New York City, where it operates
a trade office. See the Yahoo Finance article
(CLICK HERE).

◄$$$
THE CHINESE WILL REPLENISH THE US-BANK SYSTEM
WITH INFUSION OF A SIZEABLE PORTION OF THEIR
USTREASURY BOND HOLDINGS. THE FRACTIONAL SCHEME
WILL CREATE NEW MONEY WITHOUT THE USFED HAND
DIRECTLY. THE NEW FEDERAL RESERVE NOTE EXPANSION
COULD FINANCE A GRAND BANK ACQUISITION BINGE
BY THE CHINESE, OR OTHER ASSET GRABS. $$$

A
fellow who writes under the name of Throxx,
so told, is a sharp analyst on banking matters.
The following points are his comments, passed
along by a colleague in an attempt to shed
light on the Chinese incursion on US banking
soil. He sees QE as occurring in a new twist,
following Operation Twist and its deception.
He wrote, "In my humble opinion, QE3
is presently being implemented via the chartering
of new bank holding companies in the United
States, which will utilize Chinese held USTreasurys
as their base capital. The Chinese-held USTreasurys
will be utilized as base capital upon which
to create $trillions of digital Federal Reserve
Notes via fractional reserve. While these
Treasurys were held outside of the US banking
system, FRN could not be created via fractional
reserve. But now these Treasurys, they
will be used as a basis to generate digital
FRN out of thin air. If China holds $1.2 trillion
of USTreasurys, then $1.2 trillion in USTreasurys
equals the possible creation of $10.8 trillion
new digital FRN via fractional reserve banking.
Sounds kind of like a money printing scheme,
doesn't it? No 'Dollar of Capital' rule as
our host would say. Sounds a tad inflationary,
doesn't it? This is exactly how the US Banks
counterfeited FRN and ramped up inflation
during the housing bubble. It is going to
be done again with the help of the Chinese.
The Chinese are not going to dump their Treasurys.
The Chinese are going to print $trillions
of digital FRN and go on an unprecedented
USGov and USFed sponsored leveraged domestic
buying binge!" See the Market
Ticker weblog (CLICK HERE
and HERE).

The
Jackass rejoinder is to expect only a few
$100 billion perhaps at most to be infused.
Even that would facilitate $1 trillion in
asset purchases like banks, idle factories
(think Chinese components), idle shopping
malls (think Chinese brands), idle car dealerships
(think Chinese cars), commercial buildings
(think Chinese upper class managers), even
lush hotels (think Chinese tourists). It could
be colonialism. It could be foreign investment
to assuage trade friction conflicts. The next
stage of the financial crisis will take a
few new twists. The Western Govts are looking
for other nations to bail them out, because
they cannot bail themselves out, not without
causing hyper-inflation on a Zimbabwe scale.
The West is suffering from widespread systemic
insolvency, in desperate need of fresh capital.
The whole charade ends when key players finally
call it out, either voluntarily or forcibly,
via margin calls and ambushes.

◄$$$
AMID SIGNS OF ECONOMIC WEAKNESSES, CHINA PLANS
TO LET LOOSE A MOUNTAIN OF CASH FOR LENDING.
UNLIKE THE UNITED STATES AND OTHER WESTERN
NATIONS, THE PEOPLES BANK OF CHINA IS DIRECTED
BY POLITICIANS IN A CONTROLLED FINANCIAL SYSTEM.
THE CHINESE WILL JOIN THE GLOBAL QUANTITATIVE
EASING MOVEMENT BY STORM. $$$

The
Chinese Economy is slowing down, or better
put, its growth rate has tempered from torrid
to brisk. The Peoples Bank of China, controlled
by the central state planning group, announced
more accommodation of monetary policy in response
to a raft of weaker economic indicators. They
would reduce the Chinese bank reserve ratio
from 20.5% to 20.0% for large banks in an
effort to free more bank capital. Small and
medium sized banks will be required to hold
16.5% of deposits as reserves, set at 17.0%
formerly. Growth in imports had come to a
virtual halt in April compared with a year
earlier, an unexpected development. Their
economy depends heavily on imported commodities
as well as imported computer chips, sophisticated
factory tools, and other high-end products
used in factories. Exports grew half as fast
as expected in April. Also, industrial production,
fixed asset investment, and retail sales all
increased more slowly than expected in April.
Separate figures from showed weak growth in
bank lending as well, to complete the moderation
story. The reduction in the bank reserve
ratio is the third in the past six months.

Consumer
prices across the Middle Kingdom appear to
be under control, rising 3.4% in April from
a year earlier, slightly above target. As
with Western bank lending, the trend has been
for businesses to foresee fewer profitable
investments and expansion opportunities. The
harsh decline in land and apartment prices
has resulted in steep collateral value reductions
from which to borrow. The government initiative
was to bring down property prices for the
benefit of the masses. Inefficiency extends
from goofy communist policy, as the banking
system continues to allocate credit mainly
to state owned enterprises and local governments
out of obligation and favoritism, instead
of directing credit to the more efficient
private enterprises. The USGovt is parallel
in favored ineffective policy, as it directs
money to the criminal enterprises on Wall
Street already shown to be guilty of big league
fraud. Without debate, the Chinese Economy
is slowing down, with the base of growth narrowing.
The PBOC response will be to open the gates
and send mountains of money into the system,
whether efficiently directed or not. In doing
so, they will join the Western in unbridled
QE to Infinity. The process is picking
up speed. In the second week of May, the PBOC
pumped $41 billion into the Chinese banking
system. They just announced a hefty 50 basis
point rate cut in the discount rate, and a
matching 50 bpt cut in the bank reserves requirement.

◄$$$
THE BANK OF JAPAN HAS PLEDGED TO PRINT MONEY
IN ANY PENDING EMERGENCY. THEY POINT TO POTENTIAL
EMERGENCIES ARISING. THE PLEDGE WAS GENERAL
BUT EMPHASIZED A CONTINUED WILLINGNESS TO
DEBASE MONEY. POLITICAL RANKING MEMBERS WISH
FOR BETTER RETURNS ON THE $TRILLION SOVEREIGN
ACCOUNT, AND MIGHT BE THINKING ABOUT GOLD
PURCHASES. IT IS A RISING ASSET. $$$

The Bank of Japan pledged to deploy its foreign currency
assets, valued at $63 billion, toward any
global emergency response to turmoil in financial
markets.
The bulk of Japan's $1.2 trillion in FOREX
reserves, the world's second largest after
China's, will not be altered in usage. BOJ
data as of September showed more than 90%
of its holdings were in bonds. The official
statement said, "Time may be necessary
before international organizations and other
relevant institutions are able to take necessary
measures. [The bank] would be prepared to
provide foreign currency until international
support is provided. There have been situations
where the market liquidity of assets once
considered as relatively safe has deteriorated,
accompanied by, in some cases, increased credit
risk. [There has been] a growing tendency
for a financial shock in one corner of the
world to spill over into other markets, and
the speed of such spillovers has accelerated."
In other words, they wish to diversify the
reserves and find safer and more productive
investments than overpriced USTBonds and crumbling
EuroBonds and wasteful UKGilts. THINK GOLD.
The bank knows better than to mention interest
in gold, for fear of US retaliation by syndicate
overt and covert actions. Legislators in
Tokyo's upper house is angry about poor returns
on their national savings account, wasting
away on Euro bond toilet paper losses, and
earning nothing on toxic USTreasury Bonds
supported by bond monetization, both admitted
and hidden. The primary emphasis for the BOJ
reassurance was to provide emergency liquidity
to Japanese financial institutions if needed.
For the moment, they do not face any problems
with their foreign currency funding, claimed
the central bank. See the Bloomberg article
(CLICK HERE).

The
Bank of Japan stepped back into the stock
market in early May, making its largest single
day purchase of exchange traded funds ever.
The Japanese central bank bought about $500
million worth of stock in ETFs as part of
its ongoing asset-purchase program, besting
a previous record by 40% set in April. The
trend is active and upward. The BOJ also bought
a small amount of REIT stocks, but with little
or no impact on the real estate market.

◄$$$
AUSTRALIA SURPRISED WITH A 50 BPT RATE CUT
TO 3.75% IN A BOLD MANEUVER THAT CHOOSES GROWTH
WITH INFLATION OVER AUSTERITY AND DECLINE.
THEY CAN ALWAYS LIE ON THE SUBSEQUENT PRICE
INFLATION WHEN CLAIMING MORE ROBUST GROWTH
LATER. THE AUSSIES HAVE BEEN THE MOST RESPONSIBLE
KID ON THE CENTRAL BANK BLOCK BY AVOIDING
THE CAPITAL DESTRUCTION FROM A ZERO PERCENT
POLICY. $$$

The
Reserve Bank of Australia cut its benchmark
interest rate by a steep 50 basis points,
from 4.25% to 3.75% in a mild shock policy
move. An imbalance had developed with retail
banks, lifting their rates to counter higher
funding costs. RBA Governor Glenn Stevens
gave indication that the bold rate cut was
in response to skittish global conditions
where Europe could continue to produce adverse
shocks. Interpret that to mean global
systemic breakdown, no sugar coating like
Stevens. The rate cut was seen as an admission
that the central bank had to do more to stimulate
growth. The way was paved by a recent tame
price inflation reading at 0.1%, well below
the expected 0.6% widely bandied.

The
Aussie Dollar has declined in the following
two weeks, having come from 103.98 when the
news was cut to 100 parity and even lower,
down to 98. The nearly 6% exchange rate
devaluation is rather hefty and could cause
a different kind of shock wave Down Under.
The tradeoff is to stimulate exports with
cheaper prices, but with a dose of price inflation
on commodities and imports. The benefit
to exporters might be a nothing wash, no win.
The cost to the domestic economy might be
higher costs, a lose. The CPI can be doctored
later, with US stat rate help on methods,
where much experience lies. However, the Aussie
Economy is a dynamo on commodity output. If
commodity prices remain tame, the plan will
bear results. The biggest factor to price
inflation has been and will continue to be
federal deficits. Australia fell victim with
the extreme gullibility (if not stupidity)
to build up defense spending at the urge of
the Bush II Admin. It is still unclear exactly
who the defensive outlays were against. My
guess is for defense contractor profit.

Slowdown
is broad within Australia. The 4Q2011 GDP
growth was reported at 0.4%, down from 0.8%
in Q3. Regard actual growth to be less, since
they use similar methods in calling some portion
of price inflation as growth. Meanwhile, quarterly
house price data showed that detached home
prices fell 1.1% on quarterly sequence ending
March, a big decline. While some corners criticize
the RBA central bank for high official interest
rates, near the highest among industrialized
nations, the Aussies are responsible and
have destroyed capital to a much lesser degree
than either Europe or the United States.
An artificially low cost of capital has a
negative effect of destroying capital by raising
the entire cost structure unduly. The Aussies
are less in the line of fire on capital destruction
and economic deterioration by decree. The
RBA appears on the edge of desperate. The
last time the central bank cut rates by more
than 25 bpts was in February 2009 at the height
of the global financial crisis, when it slashed
rates by a full percentage point. Regard
the hefty rate cut as confirmation of renewed
financial crisis conflagration. See the
Market Watch article (CLICK HERE)
which contains internal links for additional
economic data.

## ENDLESS CENTRAL BANK INFLATION

◄$$$
THE USFED IS STUCK AT 0% FOREVER. THE REASONS
ARE TOO MANY TO LIST. USGOVT BORROWING COSTS
CANNOT RISE TO TRIPLE THE CURRENT LEVELS.
THE INTEREST RATE SWAP CONTRACTS WOULD BLOW
UP, CAUSING $50 TRILLION IN JPMORGAN LOSSES.
LASTLY (FOR NOW), THE BIG BANK CARRY TRADE
WOULD ROLL BACKWARDS ON THE ENTIRE US-BANKING
SYSTEM, CAUSING WORSE INSOLVENCY. THE USFED
WOULD BE OBLIGATED TO BAIL THEM ALL OUT. THE
POLICY IS Z.I.R.P. FOREVER. CLEARLY. $$$

Charles
Biderman and Jim Bianco are excellent credit
analysts with insights into the USFed balance
sheet. The USGovt requires at least $100 billion
per month, hardly able to tap any vast wellspring
of US savings. So the USFed resorts to Operation
Twist, and to creation of demand at the short
end by promising the big US banks of 0% for
another two to three years. The promise keeps
the banks investing in USTBonds, and not lending.
A change in the official short USBill yield
would kill the carry trade that captures the
yield differential between the 10-year and
the very short maturities. As seen with the
JPMorgan losses (due secretly to the Interest
Rate Swap accident), higher official rates
driven by the Fed Funds rate would cause a
rapid eradication of all things banking in
the United States. The interest rate derivative
market would implode, a nuclear event resulting
in losses between $30 and $100 trillion. Ironically
the USFed is a prisoner of its own Zero Interest
Policy and Quantitative Easing both. The
QE assures rising cost structure and USEconomic
sluggishness better known as permanent recession.
The ZIRP assures mispricing of assets that
keeps high the pressure on commodity investments,
while offering savers next to nothing in a
grand wet blanket atop the entire USEconomy.
The USFed cannot afford to see economic growth,
and has stifled it. The USFed has successfully
overcome the chronic 10% price inflation via
heavy usage of Interest Rate Swap derivatives
to create artificial demand. They overcome
the chronic $1.5 trillion deficits also. But
in doing so, they put themselves in a monetary
straitjacket, never able to leave the 0% rate.
They trumpet a march to safe haven that does
not exist and does not include any members
in the march. Welcome to the Land of Orwell.

Biderman
and Bianco offer a fine simple primer of the
USFed's implicit risk-free carry trade. They
explain how Operation Twist and its implicit
funding of this carry trade is nothing more
than the US version of the European LTRO.
Implied is the USFed's balance sheet being
considerably larger than it appears. The USTreasury
Bond ponzi scheme is slowly coming into view,
the main engine to the hyper monetary inflation.
It is unraveling with JPMorgan losses, to
grow over time and become obscene. See the
Zero Hedge article and video (CLICK HERE).

◄$$$
THE GLOBAL INVESTMENT COMMUNITY STILL ADMIRES
BERNANKE, AS DEBASEMENT OF MONEY IS A POPULAR
THEME AND WIDELY DESIRED PATH. THEY EXPECT
(MORE LIKE HOPE & PRAY) FOR MUCH MORE
BOND MONETIZATION. EASY MONEY KEEPS PAPER
ASSETS BUOYED IN PRICE, EVEN WHILE THE ENTIRE
PLATFORM SINKS. HIS ADMIRERS HAVE A BLIND
EYE ON CAPITAL DESTRUCTION, IGNORING THE RISING
COSTS AS NORMAL, AND CALLING THE RISING ASSETS
BENEFICIAL. AMERICA HAS LOST ITS SENSE OF
INDUSTRY. $$$

The
Bloomberg poll of investment managers is stark
and telling. The worldwide community of fund
managers still admires USFed Chairman Bernanke,
despite his endless errant forecasts. They
love him because he throws money into the
crowd, debasing it in the process like a rugged
leap into the mosh pit. The mindless wild-eyed
behavior is exemplary as it demonstrates the
public acceptance of monetary debasement and
ignores the consequence of higher cost structure
that brings systemic ruin. They care about
inflating shares and other prices without
concern for the damage inflicted. What happened
to home prices will happen to stock values,
as soon as the intervention if relaxed. The
biggest high frequency trader is the USGovt
with its Working Group for Financial Markets,
active most days at 10am and 3pm. They investment
community implicitly harbors disdain and neglect
for Main Street, as long as the finance sector
rolls onward and upward. The poll of over
1200 people revealed a 75% favorable rating
for Bernanke, a 66% rating for Mario Draghi
(head of Euro Central Bank), and a 51% rating
for Treasury Secy Geithner. The polled parties
expect by 39% for a continuation of bond purchases,
and by 22% a formal QE3 program. Bernanke
and Draghi and Geithner are the marquee clowns
of monetary ruin. The poll is not a random
sample obviously, since entirely within the
finance sector, which will cheer the monetary
debasement all the way to the end of the road
when the USGovt debt default occurs.

◄$$$
AN INFLATION SURGE COMING. IF INTEREST RATES
BEGIN TO RISE, LOAN DEMAND MIGHT NOT BE QUELLED.
THE HYPOTHESIS SEEMS TRUE BUT ONLY IF RATES
CAN RISE. INSTEAD, CENTRAL BANKS WILL FLOOD
THE SYSTEM WITH MORE EASY MONEY SINCE THE
GLOBAL ECONOMY IS SLOWING DOWN. CENTRAL BANKERS
ARE TURNING SCARED. THEIR EASY MONEY SOLUTIONS,
THEIR EXPANSION OF DEBT SECURITIES WITH DIFFERENT
INK, THEIR GRANTS TO COVER TOXIC BONDS HELD
BY BANKS, IT ALL IS WORKING TO WEAKEN THE
GLOBAL ECONOMY. THEY ARE EXHAUSTED FOR WORKING
SOLUTIONS. THE SOLUTIONS WILL COME FROM THE
EAST, AS THE USDOLLAR IS REJECTED AND THE
USTBOND IS ISOLATED AS A USFED BALL OF YARN.
$$$

Larry
Edelson of Weiss Research is a sharp analyst
with good insight and a bold style. He wrote
an essay worthy of mention. "Believe
it or not, the central banks do not understand
interest rates. They think that they can raise
rates at the appropriate time and that higher
rates will quell loan demand, thereby pulling
liquidity out of the system. That might be
true in a more normal economy, but in today's
economy, it is totally backward. Reason: Because
rates are so low to begin with, as rates rise,
it is likely to have the opposite impact.
Investors and consumers will begin to realize
that rates are going up, and they are then
going to want to buy more, borrow more, and
invest more. In other words, as the central
banks raise rates somewhere down the road,
they are going to see precisely the opposite
of what they intended. A surge in credit and
loan demand. That means that the $4 trillion
the central banks printed will run like crazy
through the global economy, pushing up overall
price levels. For another reason, forget reeling
in the $4 trillion the central banks have
already printed. They are about to print a
heck of a lot more! There is no question that
is coming. Just look at what is happening.
Britain is now officially back in a recession.
France's economy is slumping. Spain's economy
is toast, in a depression. Portugal's economy
is collapsing again. Even Germany's economy
is starting to slow. And in each one of the
above countries, the debt crisis is getting
worse.

So I have no doubt the European Central Bank will soon
print more money. The same applies to Japan,
who just last week started another round of
Quantitative Easing, printing another $68
billion. Then take the United States, where
we will have miserable unemployment, where
it appears real estate is softening again,
and where we have elections in just six months.
The status quo in Washington will do just
about anything to keep their jobs, including
putting pressure on the Fed to print more
money. Bottom Line: There is no question in
my mind that another inflationary surge is
right around the corner."

The
next flood of money will raise the cost structure
and accomplish next to nothing in business
formation, labor hires, and new income. The
central bankers are no longer pushing on a
string. They are shoving money into a black
hole, which produces a cantilever effect in
rising cost structure like a rising lake water
level. They have no concept of economics,
capitalism, or legitimate income in the Western
side of the world. Pay less heed to the point
made by Edelson about a rush to borrow money
in extended credit. The Interest Rate Swap
tool will keep interest rates down. The USGovt
creditors might be frustrated by poor low
bond yield for income on reserves, but they
have lost the market. The main buyer for the
new and rolled over USTBonds is the USFed
through debt monetization. Even migration
from stocks to bonds is almost played out
exhausted. The real message from Edelson at
Weiss Research is that the next push on QE
to Infinity is being ordered, soon to be delivered,
but to the finance sector and not to Main
Street.

Some
of the most dangerous and erroneous economic
thought comes from the popular clown Paul
Krugman. Do not be fooled by his Nobel Economics
Prize. Krugman is a monument to economic
stupidity. It was awarded in order to
placate the finance sector mavens and to endorse
heretic monetary policy espoused by the Wall
Street bond thugs. Krugman argues for more
monetary easing in the midst of the unending
crisis, without realizing that the artificially
low interest rate is the primary cause for
the lack of recovery, along with refusal to
liquidate large insolvent banks loaded down
by toxic paper. Krugman is a carnival barker
who serves as a Wall Street promenade of shamans.
He wishes to produce higher inflation in order
to liquidate the old debt. He wishes to endure
higher deficit spending in order to produce
jobs, without realizing the opposite effect
occurs. He wishes to conduct more bond purchase
programs without realizing the harmful effect
to the USDollar, and the knee-jerk reaction
to food and energy prices. The induced inflation
desired by the hack prize winning Krugman
causes higher costs, more job cuts, lower
income, deeper recession, and higher federal
deficits, in a massive powerful vicious circle
described in detail by the Hat Trick Letter
for over four years. The result would be greater
debts, not lower. If he cannot notice the
ass-backward impact from three full years
of 0% damper effects, he never will.

Krugman has learned nothing from the extended 0% rate
and the chronic $1.5 federal deficits that
refuse to go down from extended stimulus already.
He has not grasped the gravity of the situation,
wherein lower rates no longer stimulate, but
rather eradicate the profit margin for business
models, and eliminate jobs. Krugman is a lousy
economist who cannot argue successfully any
of his Keynesian wrong-footed theories. None
have panned out in the crisis that will not
end until the USGovt debt default occurs,
the end of the road and the stamp of finality
for the United States to enter the Third World.
See the Dollar Collapse article (CLICK HERE).
As footnote, the Nobel Prize has lost all
value in my book since Obama won the Peace
Prize, after not doing a single deed in the
effort toward peace as a US Senator. The prize
grant was a giant F.U. to the world. No offense
to the office of the Presidency, only to the
powerful groups that control it. In my estimation
either Oprah Winfrey or Jay Leno was more
deserving. The Western economists and bankers,
a veritable tag team of destroyers, will be
removed from the helm by the East. The new
solutions will be radical, to remove the USDollar
as global legal tender, to remove the USTBond
as global reserve choice.

◄$$$
DAVID STOCKMAN OFFERS SOME WISDOM ON INFLATION
AND BREAKDOWN. HE IS WISER THAN GIVEN CREDIT.
HE EXPECTS A SYSTEMIC BREAKDOWN LONG BEFORE
PRICE INFLATION CAN SURGE BY ANY DEMENTED
DESIGN. $$$

David
Stockman was the Budget Director in the Reagan
Admin. Despite some gaffs during that tenure,
he has emerged as a voice of reason and harsh
critic of current monetary and fiscal policy.
He wrote, "No, I do not think we will
have hyper-inflation. I think the financial
system will break down before it can even
get started. Then the economy will go into
paralysis until we find the courage, focus,
and resolution to do something about it. Instead
of hyper-inflation or deflation there will
be a major financial dislocation, which
means painful re-pricing of financial assets.
How painful will the re-pricing be? I think
the public already knows that it will be really
terrible. A poll I saw the other day indicated
that 25% of people on the verge of retirement
think they are in such bad financial shape,
that they will have to work until age 80.
Now, the average life expectancy is 78. People's
financial circumstances are so bad that they
think they will be working two years after
they are dead!" Stockman expects
a systemic breakdown from the attempts to
generate inflation, from excessive bond monetization,
and the unintended consequence of wrecking
the economy. He did not even address the widespread
bond fraud and financial firm thefts, nor
the array of investor lawsuits. He did not
address the absent investment capital machinery,
since bond fraud and carry trade have replaced
IPO and Bond Issuance. He does not address
the global rejection of the USDollar in trade.
Unlike in the past, the USEconomy is not a
closed system anymore. The jobs are going
to the East where labor is cheaper, regulatory
oversight is almost non-existent, capital
is cheaper, and skilled workers are plentiful.
The end result of forcing inflation to
reduce the debts is to kill capital, force
worker cutbacks, and reduce incomes. If
it does not work, the effort will be redoubled
for an amplified effect on the destructive
side. See the Burning Platform articlc (CLICK
HERE).